EXERCISES AND PROBLEMS 



IN 



ECONOMICS 



C. M. THOMPSON 



M. H. HUNTER 

DEPARTMENT OF ECONOMICS 
UNIVERSITY OF ILLINOIS 



BENJ. H. SANBORN & CO. 

CHICAGO NEW YORK BOSTON 



EXERCISES AND PROBLEMS 

IN 

ECONOMICS 

TO ACCOMPANY THOMPSON'S 

ELEMENTARY ECONOMICS 



PREPARED BY 

C. M. THOMPSON 

AND 

M. H. HUNTER 
i 

DEPARTMENT OF ECONOMICS 
UNIVERSITY OF ILLINOIS 



BENJ. H. SANBORN & CO. 

CHICAGO NEW YORK BOSTON 

1919 



& 






Copyright, 1919, 
By BENJ. H. SANBORN & CO. 



©CIA5L1899 









•?/ 



*«■ 



^v\0 



FOREWORD 

A recent investigation of the teaching of elementary eco- 
nomics disclosed the significant fact that the core of instruction 
should be a textbook that lays special emphasis on the appli- 
cation of economic laws to the solution of social and business 
problems, supplemented by numerous exercises and problems 
so designed as to cause the student to think for himself inde- 
pendent of teacher and textbook. Such a textbook and such 
exercises and problems, if they are properly to meet the need, 
must abound in illustrative material adapted to the student's 
educational development ; must stimulate his powers of ob- 
servation; and must increase the consciousness of his own 
experiences. 

These fundamental principles have guided the preparation 
of Thompson's Elementary Economics, from which the exer- 
cises and problems that follow are taken. For obvious reasons 
these exercises and problems are divided into three groups. 
Group A calls for some knowledge of textbook facts; group 
B requires investigation and observation on the part of the 
student ; while group C demands simple, deductive reasoning. 
Consequently, each teacher can, with a minimum of trouble 
and time, choose the method or methods of approach which 
seem to be the most desirable in each class or with each indi- 
vidual pupil. 

C. M. T. 

• -'; v* M. H. H. 

Urbana, Illinois, 
January, 1919. 

iii 



CONTENTS 



EXERCISES AND PROBLEMS 



I. The Social Viewpoint 

II. Nature and Content of Economics 

III. Nature of Consumption .... 

IV. Laws of Consumption 

V. Demand, Supply, and Price .... 

VI. Some Practical Aspects of Consumption . 

VII. Organization of Industry .... 

VIII. Division of Labor and Large Scale Production 

IX. Land (Natural Resources) .... 

X. Capital as a Factor in Production . 

XI. Competition versus Monopoly 

XII. Transportation 

XIII. Marketing the Products of Industry 

XIV. Government and Production 
XV. Use of Money in Making Exchanges 

XVI. Monetary Laws Illustrated from the History 

of the United States .... 

XVII. Banking and its History .... 

XVIII. Domestic and Foreign Commerce 

XIX. The Tariff in the United States 

XX. Fluctuation of the Price Level 

XXI. Distribution of Wealth in the United States 

XXII. Return to Labor (Wages) .... 

XXIII. The Labor Problem 

XXIV. Return to Land (Rent) .... 

v 



1 

4 

7 

9 

11 

15 

17 

20 

22 

25 

27 

30 

33 

37 

40 

43 
46 
49 
51 
55 
57 
60 
63 
66 



vi CONTENTS 

CHAPTER PAGE 

XXV. Return to Capital (Interest) .... 70 
XXVI. Return to the Business Man (Competitive 

Profits) ........ 73 

XXVII. Socialism 76 

XXVIII. Social Insurance .79 

XXIX. The Share of the Government in Distribu- 
tion (Taxation) 83 



EXERCISES AND PROBLEMS 



I. THE SOCIAL VIEWPOINT 



1. Why should history be called a social science? 

2. What is the essential difference between political science 
and law? 

3. What is meant by the expression " legal ethics"? 

4. Under which social science should a study of charity be 
made ? Why ? 

5. What is the interest of the historian, the political scientist, 
the sociologist, and the economist in the following social subjects : 

a. Farm tenancy? 

b. Presidential elections? 

c. Corruption in city politics? 

d. Expansion of foreign commerce? 

e. The Great War? 

/. Railroad development? 
g. The post office? 

6. What is meant by the expression " individual viewpoint ' ' ? 

7. How can the expenditure of public money for river or 
harbor improvements be justified? 

8. Why does society bear a portion of the expense of public 
education ? 

9. How does education increase industrial efficiency? 

10. Can an individual be industrially efficient and at the 
same time be cultured ? Explain. 

1 



2 EXERCISES AND PROBLEMS 

11. Just how, if at all, does training for industrial efficiency 
lessen the desire and ability of an individual to be a good 
citizen ? 

12. Define " wealth."' 

13. Explain the effect of prices on wealth. 

14. What is the difference between wealth and welfare? 

15. Why, since nature is so bounteous in the tropics, are the 
people of Central America relatively poor? 

16. Why are the people of the Arctic regions relatively poor? 

B 

1. Mention three or four public improvements in your com- 
munity. What interest do they hold for you as a student of : 

a. History? c. Sociology? 

b. Political science (civics)? d. Economics? 

2. Do students ever have individual viewpoints which society 
would not sanction, as to methods of : 

a. Earning money ? c. Spending leisure time ? 

6. Securing academic credit ? d. Using school equipment ? 

3. Enumerate the motives that cause young people to attend 
high school or college. 

a. Comment on these motives. 

b. Are any of them selfish? 

c. Are any of them entirely unselfish? 

d. Would society wholly condemn any of them? 

4. Air and sunlight are free goods. Name others. 

5. May a free good ever become an economic good? Give 
examples. 

6. Name five articles that are clearly wealth ; and five that 
are not wealth. Which of the following are wealth : 



THE SOCIAL VIEWPOINT 

a. Salt in the ocean ? /. Egyptian mummy? 

b. Weeds? g. State penitentiary? 

c. English sparrow? h. Burglar's tools? 

d. Submarine? i. Mississippi River? 

e. Rosebush? j. Climate? 



1 . What are the characteristics of a practical man ? Explain 
your answer to each of the following : 

a. Is the wealthiest man in your community practical? 

b. Do you know of any practical man that is not wealthy ? 

c. Is the governor of your state a practical man? 

d. Is Rockefeller practical? 

e. Were Presidents Washington and Lincoln practical? 

2. A public speaker recently declared that the typical Ameri- 
can city would vote to have its alleys paved with sterling silver, 
provided the bill was paid out of the Federal treasury. 
Comment. 

3. The opinion is generally held in the United States that 
society ought to provide free public education. 

a. What does "free public education" mean? 

b. Are free textbooks usually provided for high schools ? 

c. Who pays the expense of students in state normal 

schools and universities? 

d. Why do state universities usually charge law and 

medical students a relatively high tuition? 

e. Is free public education free f 

4. If $1000 a year is a fair wage for a family in Florida, 
what would be a fair wage for an Iowa family that spends $100 a 
year for coal? an Eskimo family that spends $500 a year for 
whale oil to be used for heating purposes? 



4 EXERCISES AND PROBLEMS 

II. NATURE AND CONTENT OF ECONOMICS 

A 

1. Define the word " laboratory." 

2. Describe briefly a laboratory experiment. 

3. What did this experiment teach? 

4. Why is the laboratory method called the inductive 
method ? 

5. What is the difference between the science and the art 
of physics? of botany? 

6. State some laws that are never tendencies ; some that 
may be tendencies ; and some that are always tendencies. 

a. What is always the shortest distance between two 

points ? 

b. How does pressure on a gas affect its volume? 

c. Do objects always move toward the center of the 

earth ? 

7. Why is consumption said to be fundamental? 

8. What is the relation of consumption to production? 

9. What is the difference between goods and utilities? 

10. When does destruction create utilities? When does it 
not create utilities? 

11. How does a locomotive engineer add utilities to a spool 
of thread? 

12. What is the distinction between productive and unpro- 
ductive labor? 

13. How do modern methods of exchange differ from primi- 
tive methods? 

14. State exactly the meaning of the term " distribution " as 
used in economics. 

15. Explain the difference between the exchange and the 
distribution of goods. 



NATURE AND CONTENT OF ECONOMICS 5 

B 

1. Would you use inductive or deductive reasoning in work- 
ing a problem in algebra ? in building a gas engine ? in starting 
a gas engine? 

2. Cite other instances where you have used inductive 
reasoning ; deductive reasoning. 

3. Name five unproductive occupations. 

a. Why is each occupation unproductive ? 

b. Were any of these occupations ever productive? 

c. Are any of them likely to become productive ? 

4. Why has money exchange very generally displaced barter 
exchange ? 

a. Name any articles you have ever bartered. 

b. With what difficulties did you meet? 

c. How would money have obviated these difficulties ? 

5. Show how water may assume the various kinds of utilities. 

6. Write three economic questions about a horse ; three 
about a house ; three about an automobile. Write about each 
of these three questions which are not economic. 

7. Give examples of unproductive labor that is not criti- 
cized. 

8. Mention some instances in which time, instead of de- 
stroying goods, increases their value. 

C 

1. Adam Smith held that labor to be productive must " re- 
alize itself " in some " particular subject or vendible com- 
modity. " 

a. How would Adam Smith have classified each of the 
following : 



6 EXERCISES AND PROBLEMS 

i. Domestic servant? v. Lawyer? 

ii. Soldier? vi. Merchant? 

iii. Policeman? vii. Opera singer? 

iv. Violinist? viii. Public official? 

b. How would you classify each of the above occupations ? 

Why? 

c. What changes, if any, have occurred since the time of 

Adam Smith regarding unproductive labor? 

2. During the summer of 1918 a ruling of the War Depart- 
ment concerning the employment of men of draft age raised the 
question of productive and unproductive labor. 

a. Is all labor productive ? Explain. 

b. Is all productive labor essential? 

c. Are the following productive : 

i. Farmers? 

ii. Preachers? 
iii. Teachers? 
iv. Athletic directors? 

v. Professional baseball players? 

d. Which, if any, of the above perform essential labor? 

Why? 

3. You sell a $30 suit to an old-clothes man for $5. Does 
this indicate that your wealth has been diminished ? that the 
wealth of society has been diminished? 

4. Distribution has long since become the most important 
notion in economic problems. 

a. Who share in distribution? 

6. Which group feels' most strongly that its share is in- 
adequate? Why? 
c. What is the basis of this feeling? 



NATURE OF CONSUMPTION 



III. NATURE OF CONSUMPTION 



1. Name as many motives for economic activities as you can. 

2. Do these motives cause the same activities in all locali- 
ties? in all groups? 

3. What is the distinction between necessities and luxuries? 

4. Which of the following are luxuries? which necessities? 



a. 


Bread. 


/. 


Automobile. 


b. 


Bicycle. 


g- 


Face powder 


c. 


Watch. 


h. 


Kodak. 


d. 


Diamond ring. 


i. 


Newspaper. 


e. 


Fountain pen. 


3- 


Magazine. 



5. Just how is wealth power? 

6. What is the difference between desire and demand? 

7. Which is the more fundamental? 

8. When is the demand for a good said to be elastic? in- 
elastic ? 

9. Why does the price of potatoes usually fluctuate more 
widely than the price of pineapples ? 

B 

1. What motives for economic activity are the most notice- 
able among your acquaintances? 

2. Make a list of your wants arising from instinct ; from 
habit ; and from social standards. 

3. Name any wants not included in the above list. Why do 
they arise? 

4. Mention eight articles of your own consumption which 
you consider luxuries ; eight which you consider necessities. 



8 EXERCISES AND PROBLEMS 

5. How do producers in your community seek to increase 
the desire for goods? 

6. Examine store and shop windows and try to determine 
whether or not the effectiveness of their display could be in- 
creased. 

7. Make a list of ten articles sold by your grocer ; ten by 
your druggist ; and ten by your hardware dealer. Arrange the 
articles in each list according to elasticity of demand. 

8. Which of these articles, if any, have changed in elasticity 
during the past generation? 

C 

1. " The true welfare of society depends on all having the 
necessities of life before any has luxuries." 

a. What is meant by "true" welfare? 

b. Would an equal distribution of goods necessarily sup- 

ply all with necessities? 

c. After all have been supplied with necessities, which 

luxury should be produced first? 

d. Does a demand for luxuries ever cause an increase in 

goods classed as necessities? 

2. Explain the purpose of such advertising as, " Dollar and 
a half caps now ninety-eight cents " ; " These gloves are worth 
two dollars, now a dollar and a quarter " ; " Buy now, when 
this supply is gone no more can be obtained." 

3. A stock raiser recently complained that the use of the 
automobile as a pleasure vehicle tended to lower the price of 
driving horses. 

a. Are driving horses worth more or less now than they 

were ten years ago ? 

b. Account for other forces that may have affected the 

price of driving horses. 



LAWS OF CONSUMPTION 9 

c. Would the above statement be necessarily untrue, if 
driving horses are worth more now than they were 
before pleasure cars came to be so widely used? 
Explain. 

4. Suppose the supply of several goods be doubled, would 
the fall in price be the same for each? Explain. 

5. " The demand for a given commodity may be elastic at 
one price level and inelastic at another." Illustrate and ex- 
plain. 

6. The claim is often made that the storage of eggs results 
in lower prices during the winter months than would otherwise 
be the case. 

a. How are summer prices affected ? 

b. How is the average annual price affected? 



IV. LAWS OF CONSUMPTION 



r 1. What evidence is there that the sum total of human wants 
cannot be satisfied? 

2. Why does a clothier often advertise without mentioning 
prices? 

3. How does variety affect consumption? 

4. Does the law of diminishing utility apply to the posses- 
sion of money? 

5. If the supply of goods be increased, how would the value 
of each unit be affected ? the value of the total stock? Explain. 

6. Why is money usually said to have a " reflected " mar- 
ginal utility? 

7. Explain the conditions under which a large consumers' 
surplus would exist ; a small consumers' surplus. 



10 EXERCISES AND PROBLEMS 

8. Why is it more difficult to measure the consumers' sur- 
plus of water than of oranges ? 

B 

1. Compare the window display of a ten-cent store with the 
window display of a dealer in ladies' ready-to-wear garments 
in the following respects : 

a. Variety of goods displayed. 

b. Price tags. 

c. Attractiveness. 

d. Effect on intensity of wants. 

2. Name 25 nationally advertised goods. Why does a 
monopolist advertise his products? 

3. Make a list of ten of your personal wants in the order of 
their intensity. Would this order be changed if each were 
multiplied by five? 

4. Make a list of the articles you would buy if you had $100. 
How would this list be affected if, instead of $100, you had $200? 

a. Would the number of items be increased? 

b. Would the first list contain items not included in the 

second list? 

c. Would the second list contain the same amount of any 

item or items included in the first list? 

d. Is it likely that the second list will contain but one 

item? 

5. Call to mind some recent purchases you have made. In 
which did each of the following have an influence : 

a. Law of diminishing utility? 

b. Law of marginal utility? 

c. Consumers' surplus? 



DEMAND, SUPPLY, AND PRICE 11 

6. Estimate the amount of consumers' surplus in the pur- 
chase of a lead pencil, a pair of shoes, a dish of ice cream, a loaf 
of bread, a suit of clothing. 



1. Many people condemn window displays and advertising 
as an economic waste. Discuss from the standpoint of : 

a. Social progress. 

b. Service to the consumer. 

c. Good will in merchandising. 

2. A prominent lawyer recently told the story of how his 
greatest, unattained ambition when a boy had been to own a 
shotgun. Now he has wealth enough to buy hundreds of such 
guns, but has not one. 

a. Account for his change in desires. 

b. Did he have a demand for a gun when he was a boy? 

c. Has he now sl demand for a gun ? 

3. " A clothier, when he goes into the market to buy goods, 
usually has some adequate notion of the marginal utilities of 
his customers." 

a. Why do some clothiers handle only expensive cloth- 

ing? 

b. Why do others handle cheaper grades? 

c. Why do some handle both expensive and cheap 

grades ? 

V. DEMAND, SUPPLY, AND PRICE 

A 

1. What is meant by the expression " supply and price "? 

2. How is price affected by demand ? by supply? 



12 EXERCISES AND PROBLEMS 

3. How does price affect demand ? supply? 

4. Why do sellers have minimum prices? 

5. How does each determine his minimum price? 

6. Why do buyers have maximum prices ? 

7. How does each determine his maximum price? 

8. What are some of the different meanings of " market " ? 

9. Does the supply of a commodity include what is in the 
hands of the consumer? 

10. Which buyers in a market cannot buy? 

11. Which sellers cannot sell? 

12. Why do many summer tourists like to go where no other 

tourists have gone? 

B 

1. Make a list of goods that advanced in price during the 
Great War and try to determine how these advances affected 
production. 

2. Attach maximum prices to five articles you have recently 
purchased. 

a. Compare these prices with the prices you paid. 

b. Determine your approximate consumers' surplus on 

each purchase. 

c. Would a lower price have caused you to buy more of 

any article than you did buy? 

d. Did you feel the influence of other buyers? 

3. Give examples from your own experience or observation 
of the four possible market conditions. 

4. Mention the names of any articles you have seen sold at 
" cut prices." Discuss these sales under the following heads : 

a. Elasticity of demand. 

b. Competition among sellers. 

c. Competition among buyers. 

d. Seasonableness. 



DEMAND, SUPPLY, AND PRICE 



13 



5. How has your refusal to buy any article which was on sale 
affected the market price of that article ? 



1. During the winter of 1918-19, the statement was often 
made that the high wages per ton paid to miners during the 
preceding summer had tended to decrease rather than to in- 
crease the production of coal. 

a. Assuming this statement to be correct : 

i. Why were wages increased? 
ii. Why did not an increase in wages increase the 

coal output? 
iii. Can we conclude that wages vary- inversely with 
output ? 

b. Assuming this statement to be incorrect : 

i. What caused it to be made? 
ii. Why did many people believe it to be true? 
iii. Why was it not refuted? 

2. Analyze the medieval notion that in every exchange of 
goods one of the parties to the exchange lost exactly what the 
other party gained. 

3. Explain how the market price of wheat would be deter- 
mined under the following conditions : 



Amount Offered 


Price 


Amount Demanded 


10,000,000 bu. . . 


. . $1.50 . . 


. . 3,000,000 bu. 


8,000,000 bu. . . 


. . 1.25 . . 


. . 4,000,000 bu. 


7,000,000 bu. . . 


. . 1.10 . . 


. . 5,000,000 bu. 


6,000,000 bu. . . 


. . 1.00 . . 


. 6,000,000 bu. 


3,000,000 bu. . . 


.80 . . 


. 8,000,000 bu. 


1,000,000 bu. . . 


.60 . . 


. 10,000,000 bu. 



14 EXERCISES AND PROBLEMS 

a. At what price will the greatest amount be bought and 

sold? 

b. What effect will the market price have on consumption 

of wheat ? on future production of wheat ? 

4. If competitive prices are determined by an equilibrium 
between demand and supply, how can a store maintain a " one- 
price system "? 

5. " The price of pork has never gone as high as $2 a pound 
nor as low as ten cents a barrel." 

a. Why are there any fluctuations in price? 

b. Why are the prices higher now (1918) than ten years 

before ? 

c. Are there any conditions under which the price of pork 

might fluctuate as much as suggested by the above 
statement ? 

d. What classes of people would buy pork if it were $2 

a pound? What would other classes do? 

6. Suppose at potato-digging time a gardener finds that the 
market price of potatoes is but twenty cents a bushel. 

a. What would be his attitude toward storing potatoes? 

b. If he stored his potatoes would he be a seller in the 

market? Explain. 

c. Suppose he had no facilities for storing : 

i. Would he dig his potatoes? Why, or why not? 
ii. Might he sell them undug? How? 

d. What would be his attitude toward the next crop of 

potatoes ? 

e. Suppose he turns his attention to wheat-raising : 

i. What would be the possible effect on the future 

price of potatoes? 
ii. How might the price of wheat be affected ? 



SOME PRACTICAL ASPECTS OP CONSUMPTION 15 



VI. SOME PRACTICAL ASPECTS OF CONSUMPTION 



1. What is the economic viewpoint of consumption? 

2. How does this viewpoint differ from the ethical viewpoint ? 

3. How is consumption related to industrial efficiency? 

4. Distinguish between unwise consumption and harmful 
consumption. 

5. What are some of the motives that lead to unwise con- 
sumption? to harmful consumption? 

6. Why does the saving problem become easy after the first 
step? 

7. How does substitution encourage thrift? 

8. Distinguish between the social and the individual view- 
point of waste. 

9. What is the relation between plain living and high think- 
ing? 

B 

1. Make a list of ten articles the consumption of which is 
harmful. 

a. Would each be harmful at all times? 

6. Would each be harmful to all persons at any time? 

c. Which, if any, become harmful only with excessive 

consumption ? 

d. Would everybody agree with your list ? 

2. Mention ten instances of waste that have come under your 
observation. 

a. How many of the ten were conscious wastes? How 

many unconscious? 

b. How could these wastes have been avoided? 



16 EXERCISES AND PROBLEMS 

c. Were any of these wastes beneficial to any individual? 

Whom? 

d. Were any of them beneficial to society? Explain. 

3. Suppose you begin now to save ten dollars a month, 
investing it in building and loan stock at seven per cent. 

a. In how many years would your stock be worth $1000? 

b. How could you invest this amount to an advantage? 

c. How many times could you repeat this operation be- 

fore you are fifty years of age? 

d. What would then be the total value of your investment ? 

e. Is this amount more or less than the total wealth of 

the average well-to-do individual at that age? 

4. Make a list of food substitutions. 

a. Why are these substitutions consumed ? 

b. Which are less palatable than the foods for which they 

are substituted ? 

c. Is there any popular prejudice against any of these 

substitutes ? 

d. How, if at all, is this prejudice being destroyed? 



1. In discussions of the liquor business, what is the essential 
difference between temperance and prohibition? How could 
an individual support one without supporting the other? 
Which of the two is more intimately connected with govern- 
ment regulation? with moral education? 

2. A few years ago a large manufacturing concern estab- 
lished its pay days on Wednesdays. Shortly afterward it 
changed back to Saturdays. Give reasons for the last change. 

3. A farmer usually consumes much more food than a man 
living in the city. Does this mean that the farmer is over- 



ORGANIZATION OF INDUSTRY 17 

eating or that the city man is under-eating? How, then, shall 
we determine how much food is sufficient for any individual ? 

4. " Americans grumble at the high cost of living. If they 
would look about they would see that a much greater evil is 
the cost of high living." 

a. Has there been an increase in the cost of living? 

b. What is meant by the expression " cost of high living " ? 

c. Is there any relation between the two? 

5. " Americans are notorious spendthrifts. European shop- 
keepers have three prices for their goods : one for their native 
customers in moderate circumstances ; another for native 
millionaires ; and the highest for American tourists." 

a. Why is the typical American liberal with his money? 

b. What is the general notion about one who spends his 

money with care? 

c. Account for the prevalence of the tipping habit in this 

country. 



VII. ORGANIZATION OF INDUSTRY 



1. What was the essential difference between the English 
Industrial Revolution and the American Industrial Revolution ? 

2. What does an " industrial revolution " mean? 

3. Is there likely to be another industrial revolution? Why, 
or why not? 

4. Name three important changes in agriculture during the 
past half century. 

5. How did the tariff act of 1816 differ from preceding 
tariff acts? 



18 EXERCISES AND PROBLEMS 

6. What is meant by the expression " domestic manu- 
factures " ? " factory system " ? 

7. What are the disadvantages of a partnership? 

8. Why did the corporative form of business organization 
develop? 

9. What are the chief merits of this form? 

10. What is a " corporation charter " ? 

11. Where and how is it usually obtained? 

12. Distinguish between stocks and bonds. 

13. Why are most farms operated by single enterprisers? 

B 

1. Make lists of single enterprisers, partnerships, and cor- 
porations in your neighborhood. 

a. In which list are found the concerns that employ the 

largest capital? 

b. What kinds of business, in general, characterize each 

of these lists ? 

2. Get, if possible, a partnership agreement from some busi- 
ness man. 

a. How much money did each partner invest? 

b. What specific duties are required of each partner? 

c. How may the partnership be voluntarily dissolved ? 

3. Write up what you would consider a good partnership 
agreement for three men about to engage in the grocery business. 

4. Examine a stock certificate, and notice the following facts 

a. Name of owner. 

b. Number of shares. 

c. Par value of each share. 

d. Common or preferred. 



ORGANIZATION OF INDUSTRY 19 

5. Study a stock report, to be found in any metropolitan 
newspaper. 

a. Notice the wide variation in the prices of stocks. 

b. Why do not bonds vary so widely? 

c. Compare price of common stock and price of preferred 

stock of the same concern. 

d. Which is subject to the wider fluctuations? Why? 

C 

1. Comment on the following statement: " The enactment 
of corporation laws by the various states is the most important 
step in the development of American manufactures made during 
the past century." 

2. "A corporation is nothing more than a person without a 
soul." 

a. Explain the general attitude of corporations toward 

society. 

b. Why do many persons think it permissible to cheat a 

corporation ? 
c. Can a corporation die? Explain. 

3. A corporation with a capital of $50,000, having outstand- 
ing four per cent bonds with a par value of $50,000, earns $5,000 
annually. 

a. How will these earnings be divided? 

b. What will be the dividend rate : 

i. If all the stock is common? 
ii. If all the stock is preferred? 
iii. If one half of the stock is 8 per cent preferred? 

c. What would be a fair market price of stocks under 

each condition? 

4. Suppose a corporation with a capital of $100,000, having 
outstanding five per cent bonds with a par value of $50,000, 



20 EXERCISES AND PROBLEMS 

should fail. How would settlement be made if the total assets 
sold for $45,000? for $55,000? for $75,000? for $100,000? 
Would the affairs of the concern have been settled differently 
if, instead of a corporation, it had been a partnership? How? 



VIII. DIVISION OF LABOR AND LARGE SCALE 
PRODUCTION 



1. Why is land the most fundamental factor of production? 

2. Why is capital less fundamental than either land or labor ? 

3. Distinguish between capital and land ; capital and con- 
sumers' goods. 

4. Does capital yield a product apart from the employment 
of labor? Explain. 

5. What are the advantages of division of labor? 

6. Suggest ways of lessening the disadvantages arising from 
the division of labor. 

7. What factors may limit the division of labor in any in- 
dustry ? 

8. What is the relation between the corporative form of 
organization and division of labor? 

9. Why is division of labor in agriculture not practiced to 
any great extent? 

10. How does territorial division of labor increase the effi- 
ciency of production? 

11. What is the present tendency in the United States as to 
territorial division of labor? 

12. Point out the relation between division of labor and large 
scale production ; between the corporative form of organization 
and large scale production. 



DIVISION OF LABOR, LARGE SCALE PRODUCTION 21 

13. Are there any advantages in large scale production in 
agriculture? Explain. 

14. What are the limits to large scale production? 

15. What are the present tendencies as to large scale pro- 
duction in manufactures? 

B 

1. Make a list of consumers' goods. 

a. Explain why each is a consumers' good. 

b. Can any of them be producers' goods? 

c. What is the essential difference between consumers' 

goods and producers' goods? 

2. From your own experience or observation describe the 
division of labor carried on in some shop or factory. 

3. Call to mind persons who produce all the goods they con- 
sume ; who produce a portion of the goods they consume ; who 
produce none of the goods they consume. Which is the largest 
group ? Why ? 

4. Make a list of common schoolroom objects, such as desk, 
blackboard, book, crayon, ink, eraser, and note the importance 
of territorial division of labor. 

5. Mention several industries in the same line. 

a. In which is division of labor best developed ? 

b. Show how there is room for greater development. 

c. In which is division of labor least developed ? 

d. Account for this lack of development. 

e. Which of the two has the greater capital? 
/. Which is the more enterprising? 

g. Suggest methods of improvement. 

C 

1. A well-known retail merchant once said that the corner- 
stone of any business success is honesty. 



22 EXERCISES AND PROBLEMS 

a. What did he mean by the expression " honesty " ? 

b. Is an employee thoroughly honest who : 

i. Shirks his duties ? 
ii. Keeps one eye on the clock? 
iii. Places his employer's interests second to his own? 

c. What is your opinion of the axiom, " Honesty is the 

best policy " ? 

2. It is believed by many people that each section of the 
country would be greatly benefited by becoming self-sufficing. 

a. If such were the case, would there be more or less goods 

produced ? 

b. How would such a condition affect wealth? welfare? 

c. How do the railroads regard self-sufficiency? 

3. Comment on the following statements : 

a. " Division of labor is the unconscious cooperation of 

the members of society." 

b. " Producers' goods ripen into consumers' goods." 

c. " Large scale production in any industry is limited 

only by the amount of capital which that industry 
can control." 



IX. LAND (NATURAL RESOURCES) 

A 

1. Define " land." 

2. How does land differ from natural resources? 

3. What are the chief factors in determining the produc- 
tivity of farm land? 

4. Does the improvement of rural roads increase the pro- 
ductivity of farm lands through which they extend? Discuss. 



LAND (NATURAL RESOURCES) 23 

5. Why are some store sites more desirable than others? 

6. Why is such a large portion of the United States unim- 
proved ? 

7. Why do farmers resort to the rotation of crops? 

8. Why are store buildings usually taller in cities than in 
towns or villages? 

9. Is there any relation between the value of a residence 
site and the value of its improvement? Explain. 

10. Why would it not be profitable for every farmer to own 
and operate a farm tractor? 

11. How many clerks should a merchant employ? 

12. How large should his stock of goods be? 

13. Are there any limits to the size of the building he can 
profitably use? Explain. 

14. What considerations might cause him to change sites? 
the size of his stock of goods? the number of employees? 



B 

1. Mention the most important natural resources in your 
community. 

2. What efforts are being made in your community to con- 
serve natural resources? 

3. Locate on a map the more important regions devoted to 
the production of wheat, corn, cotton, tobacco, rice, sugar cane, 
coal, petroleum, and precious metals. 

4. What kinds of crops are best fitted for intensive farming? 
for extensive farming? Give five examples of each, preferably 
from your own neighborhood. 

5. Discuss the productiveness of various store " sites," and 
try to determine why differences exist. 

6. Locate the point of diminishing returns under conditions 
assumed in the erection of an office building as follows : 



24 EXERCISES AND PROBLEMS 

Cost of site . . $10,000 Total net annual rent Nothing 

Cost of first floor . 8,000 Total net annual rent $1,400 

Cost of second floor 5,000 Total net annual rent 1,900 

Cost of third floor 4,000 Total net annual rent 2,350 

Cost of fourth floor 4,000 Total net annual rent 2,700 

Cost of roof . . 1,000 Total net annual rent 2,700 

7. Draw a diagram illustrating the law of diminishing re- 
turns in some industry with which you are familiar. 

C 

1. American farmers are constantly being criticized because 
they do not produce as much per acre as English farmers. 

a. Is this criticism just? 

6. If so, why do not American farmers operate more in- 
tensively ? 
c. Are there limits to intensive farming? Explain. 

2. " The opening of the Erie Canal affected both intensive 
and extensive agriculture in the United States." 

a. How was the average size of farms affected? 

b. In what ways was the New England farmer affected ? 

c. What was the effect on farming methods in Ohio ? 

d. Did the kinds of crops grown undergo any changes? 

Explain. 

3. A coal operator was requested by a government official 
during the summer of 1917 to state how much it cost to mine a 
ton of bituminous coal. His answer was : " Show me the mine." 
Why could he not answer more satisfactorily? 

4. " Iowa and Central Illinois are the heart of the best corn- 
producing region in the world." Comment. 



CAPITAL AS A FACTOR IN PRODUCTION 25 

X. CAPITAL AS A FACTOR IN PRODUCTION 



1. What was the origin of capital? 

2. Name the three steps necessary to create capital. 

3. Are any individuals or groups unable to take these steps? 
Explain. 

4. Which is the more useful member of society, a miser or a 
spendthrift ? 

5. Why is capitalistic production said to be roundabout 
or indirect ? 

6. What are the advantages of indirect production over 
direct production? 

7. How does the replacement fund give mobility to capital? 

8. Explain how a carpenter's hammer replaces itself. 

9. What has become of the large amount of capital formerly 
used in the buggy and carriage industry? 

10. Is any capital completely fixed? Explain. 

11. Where should the line be drawn between fixed and cir- 
culating capital? between free and specialized capital? 

12. Why should specialized capital yield a larger income than 
free capital? 

13. Just why is gold a highly specialized form of capital? 

14. Name some forms of social wealth. 

B 

1. Call to mind persons in your community who contribute 
to the supply of capital. 

a. Are all of them relatively well-to-do ? 

b. Which, if any, appear to sacrifice unduly in order to 

save? 

c. Which are normally thrifty? 



26 EXERCISES AND PROBLEMS 

d. Have any adopted definite plans for saving? 

e. What advice has any of them to offer in the matter of 

saving ? 

2. Imagine, if you can, a general return to direct methods of 
production. 

a. How would civilization be affected ? 

b. Would the volume of production be greater or smaller? 

Explain ? 

c. Would individuals and groups be more or less self- 

sufficing? Explain. 

d. Would people have more or less leisure time? Why? 

e. How would such a change affect public education? 

/. Name some industries that would be likely to suffer 
the most. 

3. Many tasks, such as digging ditches, cleaning streets, 
and carrying brick and mortar, are usually performed by direct 
methods. 

a. Could capitalistic methods be employed? How? 

b. Why are they not usually employed? 

c. Under what conditions are they sometimes employed? 

d. Does there appear to be any relation between capital- 

istic methods and the law of diminishing returns? 
Explain. 

4. Classify the capital in some industry with which you are 
familiar into free, specialized, fixed, and circulating. 

5. Suppose a certain individual invests $10,000 in a store 
site and building ; also an equal amount in another site and 
building utilized by the state as an armory for a company of 
militia. Which should normally earn the larger return ? Why ? 

6. Prepare a list of various forms of social capital. Show 
how each item in the list lessens the need for greater individual 
wealth. 



COMPETITION VERSUS MONOPOLY 27 

C 

1. " The corporative form of industry has been a big factor 
in the saving and investing of capital." Explain with some 
detail how this is true. 

2. Socialists usually claim that labor is the source of all 
wealth. 

a. Can wealth be created without labor? How? 

b. Can capital create wealth without the assistance of 

labor? How? 

c. How would the destruction of all wealth affect the 

efficiency of labor? 

3. " With the extension of capitalistic methods of produc- 
tion the proportion of fixed and specialized capital goods shows 
a tendency to increase." 

a. Is this statement true? 

b. Why is it true? 

c. Why, or why not, is this proportion likely to increase? 

d. Under what conditions might it decrease? 



XI. COMPETITION VERSUS MONOPOLY 

A 

1. What is the difference between laissez-faire and mercan- 
tilism? 

2. Why should the government desire to regulate industry? 

3. Who was Adam Smith? 

4. Why is he often referred to as the " father of economics " ? 

5. What is the relation between competition and industrial 
improvement ? 

6. What are some of the wastes of competition? 



28 EXERCISES AND PROBLEMS 

7. State the law of monopoly price. 

8. Why is the monopolist primarily concerned with the 
largest net return? 

9. What limitations are placed on monopoly price ? 

10. How does a monopoly come into existence? 

11. Is monopoly synonymous with " big business " ? 

12. Which monopolist would have the most power in fixing 
price, and why? 

a. The one dealing in necessities? 

b. The one dealing in luxuries? 

B 

1. Notice carefully how several competing retailers in the 
same line carry on their businesses. 

a. Which has the best site? 

b. Which has the largest stock of goods ? 

c. Which has the most attractive window displays ? 

d. Which has the most efficient delivery system ? 

e. Which advertises the most extensively? 

/. Why does not some one of them combine all these good 

points in his business? 
g. What would be the result if he did so? 

2. Observe the wastes of competition in retailing arising 
from duplicated efforts in the matter of delivery, advertising, 
rents, lighting, and heating. 

a. Suggest ways to eliminate any of these wastes. 

b. Would you suggest government regulation? Why, 

or why not ? 

c. What attempts are being made in your community 

to eliminate wastes of competition? 

3. Do you know of any former competitive industry that is 
now monopolistic? If so, did the change affect prices? How? 



COMPETITION VERSUS MONOPOLY 29 

4. Make a list of former monopolies which do not now exist. 

a. Did they become insolvent? If so, why? 

b. Did they change to competitive conditions? Why? 

5. Suppose you were a watchcase manufacturer. 

a. At what point would you fix the price of your product? 

b. Would you manufacture different grades of watch- 

cases? Why, or why not? 

c. How would you meet any competition that might 

arise ? 

6. Suppose you conducted a monopolistic business with a 
capital of $100,000. If your net income from the business was 
$75,000 a year, how could you make the return appear to be 
much less? 

C 

1. Discuss the common saying that " competition is the life 
of trade." 

2. " The monopolist has it in his power to fix prices at what- 
ever point it suits his fancy.' ' 

a. May the monopolist ignore demand? Explain. 

b. Can the monopolist control demand? Explain. 

c. Are high prices always the most advantageous to the 

monopolist ? Why, or why not ? 

d. Does the elasticity of the monopolized good affect 

the monopoly price? 

e. Would a wheat monopolist and a diamond monopolist 

be governed by the same consideration ? 
/. In what three ways is the monopolist restricted in his 
price-making ? 

3. Suppose a manufacturer of talking machines should absorb 
his competitors. 



30 EXERCISES AND PROBLEMS 

a. What would be the effect on production? 

b. How would prices be affected? 

c. Would new competitors be likely to arise? Why? 

4. " A monopoly is often advantageous to consumers, for 
prices are less than they would be under competitive conditions." 
How can this be true? 

5. The belief generally prevailed a few years ago that any 
manufacturing monopoly was sure to succeed. 

a. Account for this belief. 

b. Has experience justified this belief? Explain. 

c. What factors were overlooked by those who held this 

belief? 

d. How has the attitude of society toward monopolies 

changed ? 

XII. TRANSPORTATION 



1. What is the character of the rivers that empty into the 
Atlantic ? 

2. Mention and locate the most important harbors along the 
Atlantic coast. 

3. How do they compare with the Pacific harbors in number 
and size? 

4. What was the importance of rivers in settling the West? 

5. What effect did the success of the Erie Canal have on 
canal-building in the West? 

6. When was the Baltimore and Ohio Railroad begun? 

7. How did the Civil War affect railroad building? 

8. Which Pacific railroad was first opened to traffic? 

9. Why did the national government assist in the building 
of transcontinental railroads? 



TRANSPORTATION 31 

10. Why should our rivers be utilized to a better advantage? 

1 1 . What are the present tendencies in wagon-road building ? 

12. What is meant by the expression " joint costs " ? 

13. Mention the various kinds of railroad discriminations. 

14. How can a railroad often charge less for a long haul than 
for a short haul? 

15. Why are railroad rates higher on shipments east than on 
shipments west? 

16. On what ground, if any, is it justifiable for railroads to 
charge what the traffic will bear? 

17. What are " rebates " ? " pools " ? 

18. How successful have the states been in regulating rail- 
roads ? 

19. When was the original Interstate Commerce Act passed? 

20. What changes have been made in this act ? 

21. Is railroad capital fixed, circulating, specialized, or free? 

B 

1. A merchant of ladies' ready-to-wear garments decides to 
put in a stock of shoes. 

a. How will he determine his overhead expense in handling 

shoes ? 

b. Can he afford to sell shoes cheaper than an exclusive 

shoe merchant? Why, or why not? 

c. Can he afford to sell shoes at a loss? Why? 

d. Can he make money by doing so ? How? 

2. Suppose you invest $2000 in railroad stock. If the Inter- 
state Commerce Commission reduces rates so that the value of 
your stock falls to $1500, have you a just complaint? Explain 
with some detail. 

3. Make a list of the public service corporations in your 
community. 



32 EXERCISES AND PROBLEMS 

a. Which have corporative forms of organization? 

b. Which are monopolies? 

c. Which have their rates for service fixed by law? 

d. Which, if any, do not earn fair dividends ? 

4. What transportation systems have been beneficial to your 
community? What has been the special benefit? Make as 
long a list as you can of the ways by which you have seen goods 
transported. 

5. Illustrate, from your own experience or observation, the 
effect of the following on railroad building : 

a. Rivers. 

b. Mountains. 

c. Seaports. 

d. Raw materials. 

e. Climatic conditions. 

C 

1. " Many of the routes of our most important wagon roads 
were marked out long before Europeans came to our shores." 

a. What factors determined the location of paths made 

by wild animals? 

b. Why would the Indians naturally frequent these 

paths ? 

c. What roads did the earliest settlers use? 

d. Why should they widen and improve the paths ? 

2. A political speaker once declared that railroad rates 
should be the same for all commodities. If the many rates 
now in effect were displaced by one flat rate : 

a. How would prices be affected ? 

b. Make a list of goods which might not be shipped. 

c. How would railroad rates be affected? 



MARKETING THE PRODUCTS OF INDUSTRY 33 

d. What would be the effect on railroads in different 

sections of the country? 

e. How would railroad extension be affected? 

3. " Improved means of transportation have tended not only 
to equalize conditions of living in different parts of the world, 
but also to better the living conditions of the lower classes." 
Do you agree ? Why, or why not ? 

4. The Interstate Commerce Commission was authorized :: 
few years ago by Congress to undertake a valuation of the rail- 
roads of the country. 

a. Why was this authorization made? 

b. What different kinds of valuation was it possible to 

make? 

c. Which kind would the railroads themselves prefer? 

d. What were some of the difficulties encountered by the 

Commission ? 

XIII. MARKETING THE PRODUCTS OF INDUSTRY 



1. What is the significance of producing for the market? 

2. When is a product finished? 

3. How did markets arise? 

4. What determined their location? 

5. What kinds of goods were first produced for the market? 

6. Just how important is the place of the retailer in market- 
ing? 

7. What did the Great War teach about marketing? 

8. What is the difference between a retailer and a middle- 
man? 

9. Why are there so many different kinds of middlemen in 
marketing ? 



34 EXERCISES AND PROBLEMS 

10. Of what value is the wholesaler or commission merchant? 

11. What are some of the wastes in indirect marketing? 

12. How far would direct marketing eliminate these wastes? 

13. Why do department stores maintain free rest-rooms? 

14. Who pays the expense of maintaining them? 

15. How does credit lead to waste, particularly in retailing? 

16. What groups of individuals might object to more direct 
methods of marketing? 

17. How valid are the claims of department stores that they 
sell goods cheaper than their competitors in special lines? 

18. What effect has variety of stock on volume of trade ? 

19. What is the chief objection urged against the mail-order 
house ? 

20. How valid is this objection? 

21. What is a " chain store " ? 

22. Why can a variety store usually offer goods at excessively 
low prices? 

23. What lines of goods are best adapted to sell directly to 
consumers ? 

B 

1 . Trace a quantity of iron ore through its different processes 
of production, pointing out the different markets in which it 
is offered for sale. Do the same with corn, wheat, and cotton. 

2. Mention any articles of your own production which you 
have consumed. 

3. Imagine yourself in an early English market place. 

a. Where was it located? 

b. What kind of goods were offered for exchange? 

c. What difficulties were encountered in making ex- 

changes ? 

d. Was bargaining characterized by ''higgling " ? Explain. 

e. How important was the part played by money? 



MARKETING THE PRODUCTS OF INDUSTRY 35 

4. Suppose you decide to follow the " cash and carry " plan 
of buying groceries and meats. 

a. How much time would you consume each day in going 

to the markets? 

b. Would these trips involve wear and tear on shoes and 

clothing? 

c. Can goods be carried more cheaply than they can be 

hauled ? 

d. Is your time worth more or less than that of a delivery 

boy? 

e. Would you be more likely to buy with greater care 

than if you telephoned your orders? 
/. Weigh the advantages and disadvantages of marketing 
in person, 
i. Which has the greater weight? 
ii. Is the weight as great as is sometimes thought? 

5. Give some instances from your own experience or obser- 
vation of attempts to bring producers and consumers closer 
together. 

a. How well did these attempts succeed? 

b. Did any one oppose them? Who? Why? 

6. A merchant requests you to draw up plans for the estab- 
lishment of a chain of stores. 

a. What kind of business would you suggest ? Why ? 

b. In what cities would you establish stores? 

c. What sort of sites would you desire to utilize? 

d. How would the choice of cities and sites be influenced 

by the character of the business ? 

C 

1. " The greatest need in the modern industrial world is to 
bring the producer and the consumer together." 



36 EXERCISES AND PROBLEMS 

a. Is this a universal opinion ? Why, or why not ? 
6. Who would be likely to hold an opposite opinion ? 

c. What steps would be necessary in making such a 

change ? 

d. Who would profit most? 

e. Who would suffer? 

2. During the past decade two or three men have made 
millions of dollars in operating chains of restaurants. 

a. What particular advantage has the chain store in the 

restaurant business? 

b. Which types of restaurant still predominate in the 

cities ? 

c. What is the present tendency? 

d. How does a rise in the prices of foodstuffs affect the 

different types of restaurants ? 

3. The chief argument advanced by retailers against mail- 
order houses is that the people would profit by spending their 
money at home. 

a. Do mail-order houses undersell local merchants? 

Discuss. 

b. Just how far is this argument valid? 

c. To what extent is advertising a factor in the success 

of the mail-order house? 

d. Can local merchants use to advantage the methods 

employed by mail-order houses? How? 

e. How may local newspapers be used to advantage by 

local merchants in their competition with mail-order 
houses ? 

4. Discuss with a live local merchant the economies claimed 
by mail-order houses. Ask him to compare prices and quality. 
Which offers the best value? 



GOVERNMENT AND PRODUCTION 37 

XIV. GOVERNMENT AND PRODUCTION 
A 

1. What are the chief features of the United States patent 
laws? 

2. Point out the good and the bad phases of the patent 
system. 

3. What is the value of a trade mark to the producer? to 
the consumer? 

4. How does a copyright differ from a patent? 

5. What is a trust? 

6. Are all trusts monopolies ? 

7. Are all monopolies trusts? 

8. Why did the trust movement develop so rapidly about 
1900? 

9. What caused popular opinion to be aroused against the 
trusts ? 

10. What were some of the objectionable practices of the 
trusts ? 

11. What was the Sherman Anti-Trust Act? 

12. How did this law affect the trusts? 

13. How has this law been strengthened? 

14. What is the difference between reasonable restraint of 
trade and unreasonable restraint of trade ? 

15. Why were early public utility corporations given so 
many privileges? 

16. Just how at the present time are these corporations 
usually regulated? 

17. What experience has this country had in price- 
fixing? 

18. Why is price-fixing likely at all times to be unsatis- 
factory ? 



38 EXERCISES AND PROBLEMS 

B 

1. What steps would you take in securing a patent? 

2. Make a short list of important inventions that have 
revolutionized American life and industry. Were these inven- 
tions patented? Which of the patentees has been rewarded 
adequately for the labor and skill employed in perfecting his 
invention ? 

3. Mention twenty trade marks with which you are familiar. 

a. Would you consider them as assets of the concerns 

which own them? Why? 

b. What similarities have you noticed in the trade marks 

carried by the same kinds of goods? 

c. Why do business firms often retain the names of mem- 

bers who have died or withdrawn? 

4. Just how widespread is the practice of securing copy- 
rights ? 

a. How can you determine whether or not a publication 

is copyrighted? 

b. Is this book copyrighted? What is the evidence? 

c. Make a list of ten books or other publications not 

copyrighted. 

d. Are copyrights owned by publishers or authors? 

5. Name ten concerns which you would class as trusts. 

a. How many of the ten are manufactures? 

b. Which of these appear to be monopolies ? 

c. Which, if any, have resorted to unfair competition? 

Explain. 

d. What is the general attitude of the people toward 

them? 

6. Make a list of the public utility enterprises in your com- 
munity. 



GOVERNMENT AND PRODUCTION 39 

a. Which of these are publicly owned? 

b. Which are monopolies? 

c. Why does society permit monopolies in these enter- 

prises ? 

d. To what extent are these enterprises regulated by law? 

e. Is this regulation as effective as the regulation that 

would arise from competition? Explain. 



1. " Some people deny that men who have a genius for in- 
vention and discovery require any special inducement to follow 
their natural bent." 

a. Just how does a genius differ from other persons? 

b. Do all inventors have a genius for invention ? 

c. Might genius be stimulated by a hope of reward ? 

2. Why are goods sometimes advertised, " Not made by a 
trust"? 

3. During the early years of the trust movement the argu- 
ment was frequently heard that the trust excelled all other 
forms of business organization in efficiency and economy. 

a. What is the basis of that argument? 

b. In what respects are trusts more efficient : 

i. In organization? 
ii. In buying? in selling? 
hi. In transportation? 

c. What is the relation between this increased efficiency 

and prices? 

4. Because of increased costs of labor and material a street- 
railway president finds that a five-cent rate does not bring a 
fair return. How would he proceed to secure a six-cent rate? 



40 EXERCISES AND PROBLEMS 

XV. USE OF MONEY IN MAKING EXCHANGES 



1. Name various commodities that have served as money. 

2. What must be the chief characteristics of a good money? 
Why? 

3. What is meant by the expression, " large value in small 
bulk " ? 

4. Would diamonds serve well as a medium of exchange? 
Why, or why not? 

5. Name and explain the physical characteristics of a good 
money. 

6. Discuss the characteristics of a good money as applied 
to gold. 

7. Why is gold the most generally accepted of all money? 

8. What are the uses of money? 

9. What are the advantages of money exchange over barter 
exchange? 

10. What is the standard coin of the United States ? 

11. Is the ten-dollar gold piece a standard coin ? Explain. 

12. Does the value of gold fluctuate? Explain. 

13. Does the price of gold fluctuate ? Explain. 

14. Why is it not unlawful to melt gold coins? 

15. Name the different silver coins in circulation. 

16. Are any of these coins standard money? Explain. 

17. Why is alloy used in the coinage of gold and silver? 

18. Why are gold and silver certificates called " representa- 
tive" money? 

19. Why are these certificates used in the place of coins? 

20. What are " United States notes " ? 

21. Why are these notes usually referred to as " green- 
backs"? 



USE OF MONEY IN MAKING EXCHANGES 41 

22. Why did the value of greenbacks fluctuate during the 
Civil War? 

23. Why has it not fluctuated since 1879? 

24. Is the government prepared to redeem all greenbacks on 
demand ? Why, or why not ? 

25. Why are relatively few greenbacks presented for redemp- 
tion ? 

B 

1. Give instances of where you have used money as a 
medium of exchange ; as a measure of value ; as a basis of credit. 

2. Make a collection of silver coins both new and worn. 

a. Weigh each of the dollars. 

i. What does the new dollar weigh? 
ii. Compare it with the weight of the worn dollar. 

b. Weigh each of the other coins. 

i. How does the weight of the new half dollar compare 
with the weight of the new dollar? the new 
quarter? the new dime? 
ii. Compare weights of new and worn fractional coins. 

c. Which coins show the greatest proportionate wear? 

3. Get permission of some banker to examine gold coins, 
gold certificates, silver certificates, and greenbacks. 

a. Note various denominations of each. 

b. Are there denominations higher or lower than the 

ones examined? 

c. What are the legal tender qualities of each? 

C 

1. Suppose the Federal government should decide to make a 
bushel (56 pounds) of shelled corn the standard money unit : 



42 EXERCISES AND PROBLEMS 

a. Would gold be robbed of its value? Why, or why 

not? 

b. What difficulties would be encountered : 

i. In preventing wide fluctuations in value? 

ii. In standardizing the new money unit? 
iii. In transporting money? 
iv. In storing money? 

c. How would the demand for representative money be 

affected ? 

d. How would the production of corn be affected ? 

e. Would an Iowa corn farmer be richer or poorer as a 

result of the change ? Why ? 

2. Suppose the federal government should decide to change 
the money standard, displacing the gold dollar of 25.8 grains 
(nine-tenths fine) by a gold " diller," of equal fineness, weighing 
40 grains. 

a. How would the amount of gold money in circulation be 

affected ? 
6. How would the value of gold be affected? 

c. Would the price of gold be changed ? How? 

d. What would be the effect on the prices of commodities? 

e. How would gold mining be affected? 

3. A well-known public man asserted a few years ago that 
anything would serve acceptably as a money if it bore the gov- 
ernment fiat. 

a. Have governments been successful in creating an arti- 
ficial currency? 

i. What was " Continental paper money"? 
ii. Sketch briefly the history of the greenbacks, 
iii. What served as money in the Southern Confed- 
eracy? 



MONETARY LAWS OF THE UNITED STATES 43 

b. How much value does the government stamp add to 

gold coins? 

c. What causes gold coins to circulate? 

d. What causes greenbacks to circulate? 

4. " Representative paper money is not money at all ; it 
merely represents money held by the government." 

a. Define " money." 

b. Does an exchange of a ten-dollar gold certificate for a 

ten-dollar gold coin change the amount of money in 
circulation? in the treasury? 

c. Suppose the government should spend the gold held to 

redeem gold certificates : 

i. Would they still be " gold certificates"? Explain, 
ii. Would they be money? Why, or why not? 
iii. How would their value be affected? 

d. Suppose the government should declare gold certifi- 

cates to be redeemable like greenbacks : 
i. Would they still be " gold certificates"? Explain, 
ii. How would their value be affected? 
iii. How would the value of greenbacks be affected? 
iv. What would be the effect on government credit? 

XVI. MONETARY LAWS ILLUSTRATED FROM THE 
HISTORY OF THE UNITED STATES 

A 

1. Distinguish between the mint ratio and the market ratio. 

2. Under what circumstances is gold undervalued? 

3. Why is a system of bimetallism difficult to maintain? 

4. What is meant by the expression " elasticity of the 
currency " ? 

5. Why was the mint ratio changed in 1834? 



44 EXERCISES AND PROBLEMS 

6. Which metal circulated between 1792 and 1834? after 
1834? 

7. What was the " crime of 73 " ? Who called it a " crime " ? 
Why? 

8. Why were silver dollars not being coined in 1872? 

9. Who began the agitation to remonetize silver? Why? 

10. Point out the essential differences between the Bland- 
Allison Act and the Sherman Silver Purchase Act. 

11. Just how does the Federal Reserve Bank Law give elas- 
ticity to the currency? 

12. Name the various kinds of money in circulation in the 
United States. 

13. Why do all of them pass at their face value? 

B 

1. Enumerate the various kinds of metals used in making 
United States coins. 

a. Why are different metals used ? 

b. Which of these metals does the government coin freely? 

c. How does it get the other metals for coinage ? 

d. Just exactly what does the expression " monometal- 

lism " mean? 

2. What procedure is necessary to exchange each of the 
various kinds of money for gold? 

3. Learn from some banker or newspaper the present market 
ratio of silver to gold. 

a. What changes have occurred in this ratio during the 

past few years ? 

b. How did these chariges affect the profits of the govern- 

ment in supplying fractional coins ? 

c. What would be the effect if the government should now 
• return to bimetallism with a ratio of 16 to 1 ? 



MONETARY LAWS OF THE UNITED STATES 45 



1. During the free silver campaign of 1896 many believed 
that a change of the mint ratio to equal the market ratio, which 
was then about 32 to 1, would be desirable. 

a. What was the basis of this belief? 

b. Would the adoption of the proposed change have solved 

the problems arising from bimetallism? Explain. 

2. The story is told of a congressman, who, when he heard a 
colleague state that the flow of gold from the United States was 
due to the action of Gresham's law, suggested that the law be 
repealed. Comment. 

3. The operation of Gresham's law is closely associated with 
everyday business affairs. 

a. Of two dimes which is usually spent first, Canadian 

or United States? 

b. Of two five-dollar gold pieces, one new and the other 

worn, which would be melted down for the purpose 
of making a ring? 

c. Would new or worn gold coins be shipped to England 

in payment for goods? 

d. Give definite reasons for each of the three answers. 

4. How, if at all, would the value of money tend to be affected 
by: 

a. The opening of new gold mines? 

b. An increase in the production of goods? 

c. An increase in population? 

d. An increase in the rapidity of the circulation of money? 

e. A greater practice of thrift ? 

/. An increase in the volume of banking business? 
g. A change in the weight of the gold dollar? 
h. Increased efficiency in manufacturing? 



46 EXERCISES AND PROBLEMS 

XVII. BANKING AND ITS HISTORY 



1. Who were the Lombards? 

2. Why did not the Christians ordinarily loan money? 

3. Why may a banker expect to have a balance in his hands ? 

4. What is the difference between bank deposits and bank 
notes ? 

5. What are the essential differences between a commercial 
bank and a savings bank? 

6. Why does a bank desire to loan its money? 

7. What is the difference between a commercial bank and 
a trust company? 

8. What are the functions of an investment bank? 

9. What is a " bank statement " ? 

10. What is the difference between a loan and a discount? 

11. Why is a bank's capital a liability? 

12. Would the banker consider his investment a liability? 
Explain. 

13. Define " bank deposit." 

14. How does deposit currency differ from other kinds of 
currency? 

15. How did the two United States banks differ from state 
banks ? 

16. Describe state banking between 1832 and 1863. 

17. How did the National Bank Act affect banking in the 
United States? 

18. In what respects did the Federal Reserve Banking Law 
improve banking ? 

19. Just how, if at all, was this system instrumental in sell- 
ing Liberty Loan bonds ? 

20. Locate the Regional Banks. 



BANKING AND ITS HISTORY 47 

B 

1. Make a list of the banks in your community. 

a. Which of these are : 

i. Commercial banks? 

ii. Savings banks? 
hi. National banks? 
iv. State banks? 

v. Private banks? 

b. Which has the largest capital? the smallest capital? 

c. Which are members of the Federal Reserve Regional 

Bank? 

d. Which own bank buildings? which rent? 

2. Get a bank statement from some banker or from a news- 
paper. 

a. Which kind of a bank is it (national, state, etc.) ? 

b. Inquire of some banker about any items you don't 

understand. 

c. Divide the " cash on hand " by the " total deposits." 

i. What does the result show? 
ii. Do you consider this a safe margin? Why? 

d. Can you judge the age of the bank by its statement? 

Explain. 

3. Suppose you were one of ten persons to make equal de- 
posits of money ($1000) in a bank, and that there are no other 
depositors. 

a. Will the banker be likely to loan any of this $10,000? 

Why? 

b. Is it correct to say that you have $1000 in this bank? 

Why? 

c. Would the other nine persons be justified in making 

the same statement? 



48 EXERCISES AND PROBLEMS 

d. Have the ten of you $10,000 in this bank? 

e. State exactly what each of the ten has. 

i. Is it money in the bank? or 

ii. Is it the right to demand money of the bank? 

4. Examine a bank check. 

a. How many names appear on the check ? 

b. Notice that it is payable on demand. 

c. How many times and in what ways does the amount 

named in the check appear? 

d. What is the difference between a bank check payable 

to bearer and one payable to order? 

e. Would a check be a legal claim if it were written on a 

sheet of paper twelve inches square? on the margin 
of a newspaper ? on a cuff ? 

C 

1. Turn to any bank statement such as the one shown in this 
chapter, and determine how it would appear after each of the 
following transactions has been completed : 

a. A deposit of $10,000 in money. 

b. A 60-day note for $2000 is discounted at 6% and one 

half of the proceeds is left on deposit. 

c. A check for $1000 is cashed. 

d. $3000 of the undivided profits are credited to stock- 

holders. 

e. A note of $5000 is paid in cash. 

/. Bonds having a face value of $1000 are sold for $1050. 

2. Explain why the following are liabilities: 

a. Deposits. 

b. Capital. 

c. Surplus. 

d. Undivided profits. 



DOMESTIC AND FOREIGN COMMERCE 49 

XVIII. DOMESTIC AND FOREIGN COMMERCE 



1. Why. do individuals exchange goods? 

2. What is the essential difference between domestic trade 
and foreign trade ? 

3. What is the basis of foreign trade? 

4. What is a " bill of exchange " ? 

5. What is a " bill of lading"? 

6. Define " par of exchange." 

7. How is it determined between any two countries? 

8. What persons deal in foreign exchange? 

9. What are " gold points " ? 

10. How are these points determined? 

11. What cause the rates of exchange to fluctuate? 

12. How are these rates restricted by the gold points? 

13. Explain " favorable balance of trade," " unfavorable 
balance of trade." 

14. Is an unfavorable balance of trade necessarily disadvan- 
tageous to a country? Why, or why not? 

15. How may a country maintain indefinitely an unfavorable 
balance of trade? 

16. How does a country that has no gold mines get its supply 
of gold coins ? 

B 

1. Examine the articles in your own home or in the school- 
room and try to determine which of them were produced : 

a. In your own community. 

b. In your own state. 

c. In the United States. 

d. In other American countries. 



50 EXERCISES AND PROBLEMS 

2. Secure a domestic bill of exchange from some bank. 

a. Fill it out as if you had sold a carload of corn to James 

White, payable in sixty days. 
6. What would be the next step in the transaction ? 

c. How will the bill look after its acceptance by White? 

d. Who is likely to hold the bill until it matures ? 

e. How does the accepted bill differ from a promissory 

note? 

3. The French monetary unit is the gold franc, containing 
4.48 grains of fine gold. 

a. How many francs can be coined out of a United States 

gold dollar? 

b. This number represents the " French par of exchange." 

c. Estimate the gold points. 

4. Make a list of transactions coming under your own observa- 
tion, which would affect the rates of exchange between your 
community and New York City ; the rate of foreign exchange 
between New York and South America. 



1. How could each of the following affect the rate of ex- 
change between the United States and England : 

a. Failure of the wheat crop in the United States ? 

b. The building of an American merchant marine? 

c. The purchase of London city bonds by New York 

bankers ? 

d. The return of British immigrants to the mother 

country ? 

e. The decline of gold production in the United States? 

in South Africa ? 



THE TARIFF IN THE UNITED STATES 51 

2. How would the gold points on sterling exchange be 
affected by : 

a. Change in the interest rates from 5 to 4 per cent ? 

b. Improvement in shipbuilding? 

c. Establishing aeroplane traffic between the United 

States and England? 

3. Suppose the imports from England exceed our exports to 
that country. How is this trade condition likely to affect : 

a. The rate of sterling exchange in New York? 

b. Prices in the United States ? in England? 

c. Probable future trade movements? 

d. Profits of exporters? of importers? 

4. It has been proposed that the nations of the world should 
adopt a uniform currency. How would such a proposal, if 
carried out, affect : 

a. Par of exchange ? 

b. Rates of exchange? 

c. Gold points? 

d. International trade? 

XIX. THE TARIFF IN THE UNITED STATES 

A 

1. What is the difference between a protective tariff and a 
tariff for revenue only? 

2. Why were the first tariffs not protective? 

3. Why was the South generally opposed to protection? 

4. Why was New England divided over the tariff about 
1820? 

5. Why was the tariff of 1828 called the " tariff of abomi- 
nations"? 



52 EXERCISES AND PROBLEMS 

6. Why are schedules used in tariff acts ? 

7. Why were tariff rates not lowered at the close of the 
Civil War? 

8. Account for the various changes in the tariff between 
1890 and 1909. 

9. Why is the tariff likely to be a local issue? 

10. What benefits could possibly accrue to the people of 
Iowa by placing, if it were constitutional, a tariff duty on Penn- 
sylvania iron? on Massachusetts cotton goods? 

11. Why can there be no buying abroad without selling 
abroad ? 

12. What is the essence of the " infant industry " principle? 

13. How has this principle been abused? 

14. What is the relation of protection and nationalism? 

B 

1 . Make a list of goods you know to be of foreign manufacture. 

a. Which foreign countries are represented in the list? 

b. What is the nature of the articles in the list ? 

i. Are they heavy? 

ii. What raw materials have gone into their manu- 
facture ? 

c. Why have they been imported and not made in this 

country ? 

2. Call to mind the most successful physician in your com- 
munity. 

a. Suppose that he is also a mechanical genius. 

i. Does he keep his own car in repair? 
ii. Does he repair his surgical instruments? 

b. Suppose that he is also the strongest man physically 

in the community. 



THE TARIFF IN THE UNITED STATES 53 

i. Does he make it a practice to mow his own lawn? 
ii. Does he help store the coal in his basement? 

c. Suppose that he is also the most expert typist and 

office worker in the community, 
i. Does he do his own typing? 

ii. Does he keep his own books and answer his tele- 
phone? 

d. Correct answers to these and similar questions which 

any one of us can raise, will aid in clearing our no- 
tions of protection. 

3. Inquire among the business men of your community as to 
the attitude of each toward a protective tariff. 

a. Which hold to views held by their fathers? 

b. Which are interested in a business way in the tariff? 

c. Which believe strongly in nationalism ? in international- 

ism? 

d. How many have changed their views on protection 

since they first began to give the question serious 
thought ? 

e. Learn why these views have been changed. 

/. Would you say, after making this inquiry, that the 
average business man thinks seriously on protection 
and its effects? 

4. Explain why your own community or congressional 
district is protectionist or free trade. 

C 

1 . During the first half century of our history many individ- 
uals and several sections of the country changed their opinions 
radically regarding the merits of protection. 

a. Why did the South at first favor protection? 

b. Account for Clay's zeal in supporting protection. 



54 EXERCISES AND PROBLEMS 

c. Why was New England divided over the question ? 

d. Would you expect any changes of opinion to have 

occurred in New York, Ohio, or Indiana? Explain. 

2. At one time the friends of protection argued that the high 
wages of American workmen made high tariff rates necessary to 
protect the American manufactures that gave these workmen 
employment. Now the argument is that the tariff itself makes 
the wages of American workmen high. 

a. Examine each argument. 

b. Is either sound ? Explain. 

c. Are they inconsistent ? Why, or why not ? 

d. What, in your opinion, is the relation of protection and 

wages ? 

3. Examine the statement that "the tariff is a local issue." 

a. Which sections of the country invariably support or 

oppose protection? 

b. Can you think of any inducement that might cause free 

trade senators to vote for protection? Explain. 

c. How would you expect your congressman to vote on 

protection ? Why ? 

d. Which is likely to be the stronger force, his own judg- 

ment or the interests of his district? 

4. " Every purchase of foreign-made goods diminishes the 
demand for American labor." 

a. What is the basis of this statement? 

b. What, in the long run, is used to pay for foreign-made 

goods ? 

c. Formulate your own opinion as to its correctness. 

5. What lessons on protection did the Great War teach the 
United States? 



FLUCTUATION OF THE PRICE LEVEL 55 
XX. FLUCTUATION OF THE PRICE LEVEL 



1. Why cannot the value of all commodities, gold included, 
rise or fall at the same time ? 

2. What is the relation between the price level and the value 
of an ounce of gold ? 

3. How does a change in the price level affect individual 
incomes? public incomes? 

4. What is the relation of changing price level to social 
unrest ? 

5. Why is it desirable to measure fluctuations in price level? 

6. What is the principle underlying the use of index 
numbers? 

7. How are index numbers applied to business affairs? 

8. Just how does the shifting of the price level affect in- 
dustry? 

9. Why should a crisis usually be found associated with 
high prices? 

10. What is meant by the expression " overproduction " ? 

11. What has been the experience of the United States in 
panics ? 

B 

1. Call to mind some experiences of your own in which the 
price level has appeared to change. 

2. Learn from inquiry how a rise of the price level has affected 
some stationary income such as a pension, or an annuity. 

a. Does the person receiving the income realize that it 

has declined in purchasing power? 

b. If so, what is his (or her) explanation of the decline? 
i. Is it based on changes in value of commodities? 



56 EXERCISES AND PROBLEMS 

ii. Is it based on changes in the purchasing power of 
money ? 

c. Which of the two explanations appears to be the more 

correct ? 

d. How, if at all, could the receiver of this stationary 

income protect himself (or herself) from a loss in 
its purchasing power? 
6. What is the likelihood that changes in the purchasing 
power of stationary incomes will discourage savings 
and investments? 

3. Assume prices for eleven important commodities for two 
given years, say 1914 and 1919. 

a. Compare the price level for the two periods. 

b. How would the change in price level have affected an 

annuity of $800? 

c. How, if at all, would you expect this change to affect 

wages in general ? wages of any particular group ? 

d. How should wages be so adjusted as to place the wage 

earner in 1919 on the same income level he had 
occupied in 1914? 

e. What change should be made in the weight of the gold 

dollar in order to give it the same purchasing power 
in 1919? 

C 

1. If, during a single night, the general price level should 
double, what would be the immediate effect and the long-run 
effect on the income of each of the following : 

a. Wheat-grower? 

6. Owner of a gold mine? 

c. Day laborer? 

d. Jewelry manufacturer? 



DISTRIBUTION OF WEALTH IN UNITED STATES 57 

e. Civil War pensioner? 
/. High school student? 

2. Since the fluctuations of the price level tend to create 
social unrest, why does not the government set the prices of all 
commodities and fix labor incomes? 

3. Account for the fact that wages invariably react slowly 
to a rising price level. 

4. Why does the government make little or no effort to 
prevent crises? 

5. Discuss the practicability of changing the weight of the 
gold dollar to correspond with changes in general price level. 

XXI. DISTRIBUTION OF WEALTH IN THE UNITED 

STATES 



1. Define " distribution.' ' 

2. Why are profits and taxes shares in distribution? 

3. What is the intimate relation between free land and 
distribution ? 

4. What shares in distribution went to the pioneer farmer? 

5. Why is it said that free land receded westward ? 

6. Just how did the laborer lose control of his tools? 

7. What during the past century has caused the lines 
separating the shares in distribution to become more distinct? 

8. Why is there such a great inequality in wealth? 

9. Suggest some method for removing this inequality. 

10. What is the relation between income and industrial 
efficiency? 

11. Name and evaluate the causes of inefficiency. 

12. Why is society interested in the efficiency of the in- 
dividual ? 



58 EXERCISES AND PROBLEMS 

13. Just how does taxation tend to equalize wealth and 
income ? 

B 

1. List the names of the heads of families in your block. 

a. Estimate the income of each family. 

b. Are there any noticeable variations among these in- 

comes ? 

c. Which families belong to the higher income groups ? the 

lower income groups ? 

d. How does the average family income compare with the 

average family income of your community? 

e. How does your own family income compare with the 

average family income of your block? 

2. Estimate roughly the incomes of the families represented 
in your class. With this estimate as a basis, what are your 
conclusions as to the diffusion of education among the masses? 

3. Interview persons in different income groups. 

a. Do you find any spirit of class antagonism ? Analyze. 

b. What reasons do you find advanced to explain inequal- 

ities? 

c. Inquire about solutions of the problem. 

d. Formulate your own conclusions in the matter. 

4. From observation and inquiry determine as accurately as 
possible how business men regard the following : 

a. Drinking of intoxicating liquors. 

b. Irregular hours. 

c. Habits that destroy mental or physical strength. 

d. Expensive tastes. 

e. Idleness and loafing. 

5. Suppose you were asked to devise a scheme for equalizing 
incomes through taxation. 



DISTRIBUTION OF WEALTH IN UNITED STATES 59 

a. What public enterprises would you create or enlarge? 

b. How would you regard the extension of public educa- 

tion? 

c. Would you favor supplying free bread or free meat? 

Why, or why not ? 
i. How does c differ from 6? 
ii. Which would meet the greater opposition ? 

d. Would you exempt all except the very rich from paying 

taxes? Why? 



1. " Poverty is an individual matter. No man need be poor 
in a country like the United States, where industry constantly 
cries for laborers." Comment on the above statement. 

2. Many well-to-do men argue that it is little or no concern 
of theirs if individuals refuse to be temperate and thrifty. 

a. Is this a correct attitude? 

b. Under what circumstances is society to blame for 

intemperance ? 

c. Would the well-to-do be profited financially by an 

increase in temperance or thrift? Explain. 

d. Should " the strong bear the burdens of the weak "? 

3. What is the relation of each of the following to attempts 
to distribute wealth and income more equally through taxation : 

a. Free public education? 

b. City parks? 

c. City milk inspection ? 

d. Public highways? 

e. Pure food laws? 

/. Free band concerts? 

g. Public recreation grounds? 



60 EXERCISES AND PROBLEMS 

XXII. RETURN TO LABOR (WAGES) 
A 

1. What is the difference between wages and wages of 
management ? 

2. On what ground may workers be divided into hard- 
handed and soft-handed groups ? 

3. Why are railroad men often referred to as the " aris- 
tocracy of the hard-handed group"? 

4. What is meant by the expression " non-competing 
groups " ? 

5. Just how do doctors and lawyers compete? plumbers 
and electricians ? 

6. What is the relation between education and income? 

7. What are the exact facts about the movement of persons 
from one income group to another? 

8. What should be one of the guides in selecting a profession 
or a trade? 

9. What is the relation between efficiency and wages? 

10. How does the working environment affect efficiency? 

11. Why is the cheapest labor often the highest paid? 

12. Why do business men usually refuse to pay inefficient 
employees more than they earn, trusting thereby to increase 
their efficiency? 

13. Should men and women receive the same wages for the 
same work? Discuss. 

14. What is the difference between piece wages and time 
wages ? 

15. Which is the more fundamental? 

16. Why does organized labor generally oppose the piece- 
wage system? 

17. Define " profit sharing." 

18. What does profit-sharing attempt? 



RETURN TO LABOR (WAGES) 61 

B 

1 . Determine by inquiry the occupation or profession of the 
father of each lawyer and doctor in your community. 

a. How many were lawyers, doctors, or business men 

(including farmers) ? 

b. How many were unskilled laborers? 

c. Explain any marked differences that appear between 

the occupations of the fathers of the younger men on 
your list and the fathers of the older ones. 

d. Formulate conclusions on your investigation as to 

competition between members of the same non- 
competing group. 

2. Let each student in the economics class state the pro- 
fession or occupation he expects to pursue. 

a. How many expect to compete directly with their 

respective fathers? 

b. How many expect to enter other lines in the same 

non-competing group ? 

c. How many expect to cross over into a group not oc- 

cupied by their respective fathers? 

d. What does this examination show regarding the ease 

with which lines between non-competing groups can 
be crossed? 

3. Make a list of several natives of your community who have 
made exceptional success in business. 

a. How did their respective fathers rank in the com- 

munity as to income? as to wealth? 

b. What were their educational opportunities? 

c. Considering differences in time and circumstance, can 

they offer their children better educational oppor- 
tunities than they themselves enjoyed? 



62 EXERCISES AND PROBLEMS 

4. Call to mind boys engaged in selling newspapers, in 
sweeping out offices, or in similar occupations. 

a. From what income groups do these boys come? 

b. How many are the sons of well-to-do parents? 

c. How many attend high school? 

d. How does society in general regard this kind of work 

by boys? 

e. How do the boys themselves regard it ? 

C 

1. The statement is often made that many college graduates 
may be found in the bread lines of our cities. 

a. What effect on the popular mind has the discovery of 

one college graduate begging for food? 

b. Does such a discovery make an interesting news item ? 

Why? 

c. What is the probability of magnifying such a discovery? 

d. What is the probability of such a beggar pretending 

to be a college graduate? 

e. How, therefore, should the statement be regarded? 

2. "It can easily be proved from history that a majority of 
the successful men of the United States were reared on farms 
and attended country schools." 

a. Until recent times, where else could an American youth 

be reared ? 

b. Where else, except in the country school, could the 

previous generation get an education? 

c. What is likely to be the trend in coming generations ? 

3. Discuss the need of profit sharing in American business 
affairs, its probable success, and the results that may be ex- 
pected. 



THE LABOR PROBLEM 63 

XXIII. THE LABOR PROBLEM 



1. What three forces operated before the Civil War to 
prevent the organization of labor? 

2. How did the war itself affect these forces? 

3. In what essential respects do the Knights of Labor differ 
from labor unions? from the American Federation of Labor? 

4. Distinguish between a trade union and a labor union. 

5. Why are the Industrial Workers of the World objection- 
able as an organization? 

6. Why is "sabotage" such an effective weapon against 
the employer? 

7. Just why is the employee at a disadvantage in bar- 
gaining ? 

8. How does collective bargaining remove this disadvan- 
tage? 

9. Explain how a laborer can do more work in eight hours 
than in ten hours. 

10. What are the three specific demands of organized labor? 

11. How effective is the force of public opinion in settling 
strikes ? 

12. Why is the employment of strike-breakers so objec- 
tionable both to organized labor and to the public generally? 

13. What is the essential difference between conciliation and 
arbitration ? 

14. How does voluntary arbitration differ from compulsory 
arbitration ? 

15. What obstacles have hindered labor legislation in the 
United States? 

16. Why have the courts distinguished between men and 
women in passing on the constitutionality of labor laws? 



64 EXERCISES AND PROBLEMS 

17. Why in general does organized labor favor restrictions on 
foreign immigration? 

18. What is the chief cause of the general objection to the 
newer immigration ? 

B 

1. Consult with an official of a local union. 

a. Get his viewpoint on the labor situation in general. 

b. Inquire about specific rules of work enforced by his 

union. 
\ Discuss with him the attitude of organized labor 

towards socialism. 
d. Ask him about any strike experiences he may have had. 

2. Call to mind any industrial strike that may have been 
carried on in your community. 

a. Was the public vitally interested in the strike? 

b. Were strike-breakers imported? 

c. Did the strikers picket the plant in which they had 

formerly been employed ? 

d. Which party to the strike was the most eager to 

arbitrate ? 

e. Did the state make any effort to settle the strike ? 
/. What was the outcome of the strike? 

3. From a census report or from some other reliable source 
get statistics on the number of persons in your community who 
are foreign-born or who are native-born of foreign parentage. 

a. Which nationality shows the greatest strength? 

b. Is the parentage of " foreigners " in your community 

above or below that of the United States ? your own 
state ? 

c. How many children of foreign-born parents attend your 

school ? 



THE LABOR PROBLEM 65 

4. Ask each student in the class to state the nationality 
of his father, mother, both grandfathers, and both grand- 
mothers. 

a. How many are " Americans "? 

b. Are any pure English, Irish, German, or Scotch? 

c. How many are descended from two or more of the four 

stocks ? 

d. Formulate conclusions as to the mixtures of these old 

stocks. 



1. One of the cardinal policies of trade unionism is that all 
of the members of any union should, within narrow limits, 
receive the same wage. 

a. Does such a policy hinder the more skilled workers? 

How? 

b. How do labor leaders justify this policy? 

c. What determines the wage for such a group? 

d. Why should not the wage for the same kind of work, 

plumbing say, be the same for the whole United 
States ? 

2. Organized labor is often criticized on the ground that it 
opposes the introduction of new machinery and new processes. 

a. Is there likely to be any basis for this criticism? 

b. Would organized labor be justified in taking such a 

position? Explain. 

c. How would such a policy affect production? the 

wages of organized labor? the wages of unorganized 
labor? 

d. What would be your position in the matter if you were 

an employer? a member of a trade union? 



66 EXERCISES AND PROBLEMS 

3. Many of the wisest labor laws enacted by Congress and 
the state legislatures have been declared unconstitutional by 
the various courts. 

a. What is meant by the expression " unconstitution- 

ality"? 

b. Where did the courts get this power? 

c. What procedure is necessary to make such laws con- 

stitutional ? 

4. " America is a great melting pot in which the peoples of 
Europe are transformed into Americans." 

a. Explain what is meant by " melting pot." 

b. How effective is the melting process just now? 

c. What experiences caused this expression to be coined? 

d. Should it be modified in any respect? Just how? 



XXIV. RETURN TO LAND (RENT) 

A 

1. Distinguish between economic rent and commercial rent. 

2. Why is one piece of farm land preferred to another 
piece ? 

3. What factors determine this preference? 

4. What is no-rent land? 

5. Just how can a farmer afford to operate no-rent land? 

6. How does a change in the price of wheat affect the 
economic rent of wheat lands ? 

7. What effect has soil " butchery " on economic rent? 

8. Just how does improved means of transportation affect 
economic rent? 

9. How in general is economic rent affected by an increase 
in population ? 



RETURN TO LAND (RENT) 67 

10. How does custom and habit assist to determine the 
economic rent of store sites? 

1 1 . What other factors are important ? 

12. Explain what is meant by " unearned increment." 

13. What is the relation between this increment and the 
single tax? 

14. Distinguish clearly between an " increment" and a 
" decrement." 

15. What is the relation between economic rent and price? 

16. Why does economic rent not enter into price? 

17. Just how does the interest rate affect land values? 

B 

1. Make a tour of inspection about your community. 

a. Notice the wide variations in the utilization of business 

sites. 

b. Do these business sites yield more or less than equal- 

sized sites in the residence districts? 

c. Notice the sites which form a fringe about the business 

section. 

i. How are they utilized? 
ii. What about the improvements found there? 
iii. Do they seem to be in a state of transition? 
Explain. 

d. Contrast the various residence sections. 

i. What factors cause some sites to yield more eco- 
nomic rent than others? 
ii. Just how do these factors differ? 

e. Notice the number and location of vacant sites. 

i. Why are these not utilized? 

ii. Are there evidences of owners trying to secure 
unearned increments? 
/. Widen your definition of " urban economic rent." 



68 EXERCISES AND PROBLEMS 

2. Suppose you were to become heir to a cultivated farm 
located in Patagonia. How would you determine its selling 
price ? 

3. Inquire among business men and others concerning some 
instance of unearned increment. 

a. Determine as accurately as possible the size of the 

increment (difference between buying price and 
selling price). 

b. Estimate the interest on the investment at a fair 

rate. 

c. Subtract from the interest any income that may have 

been received. 

d. What portion of the increment appears to have been 

unearned t 

e. Is this portion more or less than it seemed to be when 

you began your examination? 

4. Find an example of " decrement" in your community. 

a. What influences caused this decrement? 

b. Have you heard any one propose that society should 

compensate the owner for his loss? Who? 

5. If you were seeking a site for a cigar store, how would the 
location of the following influence you : 

a. Other cigar stores? 

6. Dry goods stores? 

c. Restaurants? 

d. Show houses ? 

e. Garages ? 
/. Hotels? 

g. Soda fountains ? 
h. Drug stores? 
i. Railway depots? 



RETURN TO LAND (RENT) 69 



1. A prominent United States senator once made the public 
statement that the high prices of farm products then prevailing 
were caused by high rents. 

a. Would you expect this statement to be criticized? 

Why? 

b. What fixes the price of any farm product? 

c. What is the relation between the prices of farm prod- 

ucts and the economic rent of the land on which they 
are grown? 

2. Why does the contract rent of a piece of land often differ 
widely from its economic rent ? 

3. How are the following likely to affect the economic rent 
of farm lands : 

a. Improved machinery? 

b. Discovery of new fertilizer? 

c. Improved methods in farming? 

d. Change in interest rate? 

e. Automobiles ? 

4. A merchant located on the fringe of a business district 
often advertises that he can, owing to the low rent which he 
pays, sell goods cheaper than competing merchants nearer the 
business center. 

a. Why is his rent lower than theirs? 

b. Suppose he gets the business of his competitors. 

i. How will the economic rent of his site be affected? 
ii. How would this affect his contract rent? 
iii. Would this claim of cheap rent continue to be 
valid ? Explain. 

c. Does his lower rent permit him to undersell his com- 

petitors ? 



70 EXERCISES AND PROBLEMS 

5. Assuming that each piece of farm land yields its entire 
economic rent to its owner, why do tenants prefer one piece over 
another? Explain with some detail. 

6. Sometimes a retail merchant advertises that he can afford 
to undersell his competitors because he happens to own the 
store site which he utilizes. 

a. Does the land underneath his store building earn rent ? 

Explain. 

b. Suppose a competitor who does not own his store 

building should invest the value of his site in rail- 
road bonds, 
i. Would he be justified in advertising that he could 
undersell his competitors because he owned bonds ? 
ii. How would the buying public regard such an 
advertisement ? 

c. If he can afford to distribute his rent among his cus- 

tomers, why should he not also advertise that he 
can undersell his competitors because he owns his own 
capital or because his wife and children wait on his 
customers without pay? 



XXV. RETURN TO CAPITAL (INTEREST) 

A 

1. Just why did the medieval church oppose the taking of 
interest ? 

2. What is the difference between a consumption loan and a 
production loan? 

3. In the conversation between Shylock and the merchant 
Antonio, what is the significance of the following expressions : 
" usuries " ? " barren metal " ? " exact the penalties " ? 



RETURN TO CAPITAL (INTEREST) 71 

4. Just how was a silent partner able to loan money without 
evading the law ? 

5. What are the two aspects of interest? 

6. Why will borrowers pay interest on loans? 

7. Why must lenders be rewarded? 

8. What determines the maximum interest rate a borrower 
will pay? 

9. What is the lowest interest rate which a lender will 
accept ? 

10. Just why are present goods usually valued more highly 
than future goods? 

11. Is saving painful? Explain. 

12. Why should the legal interest rate be higher in Wyoming 
than in Massachusetts? 

13. What is a " call loan "? 

14. Why do lenders prefer a call loan to a time loan? 

15. Why is the interest rate on bonds usually lower than the 
dividends on stocks of the same concern? 

16. Why is a railroad bond more negotiable than a farm 
mortgage ? 

B 

1. Put the following questions to some friendly business 
man : " Why are you willing to pay interest on borrowed 
money? " " Would you be willing, rather than to do without, 
to pay a higher rate than you now pay? " " How would an 
increase in the current interest rate be likely to affect your 
business? " 

2. Examine any metropolitan newspaper for quotations on 
New York interest rates. 

a. Name the various kinds of loans found. 

b. Which bears the higher interest rate? 



72 EXERCISES AND PROBLEMS 

c. Consult some banker regarding the New York interest 

rate, 
i. Inquire about the nature of a demand loan, 
ii. Ask him to explain why the rate on commercial 
loans varies but slightly. 

d. Compare these quotations with quotations found in 

older newspapers. 

3. Call to mind instances when present goods commanded a 
very high premium over future goods ; when future goods were 
more greatly desired than present goods. 

4. Name five forms of investment with which you are 
familiar. 

a. Which bears the highest interest rate? the lowest? 

b. To what extent does risk cause the difference? 

5. Inquire of some banker concerning the opportunities of 
banks in the older states to loan money in the newer regions. 

C 

1. Aristotle spoke of money as being barren, and hence 
incapable of producing interest. 

a. Do enterprisers borrow money, or is it, in the long run, 

equipment for producing goods? 

b. What assurance has an enterpriser that his borrowed 

equipment will reproduce itself and something over 
in the way of interest? 

2. Suppose it should become generally known that excessive 
profits are being made in the manufacture of shoes. 

a. How would this knowledge affect enterprisers in other 

lines ? 

b. What would be the effect on the production of shoes? 

c. Would the prices of shoes rise or fall? Why? 



RETURN TO THE BUSINESS MAN 73 

d. How would this change affect the profits of shoe manu- 
facturers ? 

3. Discuss the desirability of a state legislature fixing a legal 
rate of interest above which the law provides a penalty for 
going. 

4. As the result of an insistent demand the government 
established in 1916 a farm loan bank which furnishes farmers 
money at a moderate rate of interest. 

a. From which sections of the country would you expect 

the demand to have been the strongest? Why? 

b. How did the bankers regard this new bank? 

c. Has it succeeded to any extent in equalizing the in- 

terest rate over the whole country? 

5. The " sacrifice " theory of interest is often criticized on 
the ground that such men as Rockefeller and Morgan make no 
sacrifices in abstaining from consuming their wealth. 

a. Can wealthy men like these save all the capital needed ? 

b. Which savers exert the greatest influence in fixing the 

interest rate? 

c. Do these savers sacrifice? Explain. 

XXVI. RETURN TO THE BUSINESS MAN 
(COMPETITIVE PROFITS) 



1. Why are profits a share in distribution? 

2. What is the chief function of the enterpriser? 

3. Just why are profits residual? 

4. Characterize the typical American enterpriser. 

5. Why in the successful conduct of a business is imagina- 
tion as important as skill? 



74 EXERCISES AND PROBLEMS 

6. In what way does enterprising skill resemble land? 
labor ? 

7. Should enterprisers be guaranteed a profit by society? 
Explain. 

8. What is the source of profits? 

9. How may an enterpriser protect himself against risk ? 

10. How does this protection affect profits and losses ? 

11. In what way do profits resemble rent? 

12. What is the relation between profits and prices? 

13. Why do competitive profits tend to disappear? 

14. How are profits related to cooperative schemes? 

15. Why has cooperation usually failed in the United 
States ? 

B 

1. Many business men, farmers in particular, call their 
entire net income profits. Interview some retail merchant that 
owns his own store building. 

a. How much does he set aside each year as rent? 

b. What amount of interest does his capital earn? 

c. What portion of his income does he attribute to his 

own wages? 

d. What is the government's share in the way of taxation ? 

2. Call to mind a successful enterpriser in your community. 

a. What are his most outstanding business character- 

istics ? 

b. Does he give attention to details? 

3. Question a retail merchant concerning advertised sales in 
which goods are offered at cost. 

a. What does he understand by " cost " in this connection ? 

b. Does he always use the word " cost " in exactly the 

same way? 



RETURN TO THE BUSINESS MAN 75 

c. What variety of meanings may the word have? 

d. Analyze your own notion of its meaning. 

4. Examine, if possible, any attempts that have been made 
in your community to eliminate profits through cooperation. 

a. What was the nature of these attempts? 

b. Did any one oppose them? Who? 

c. How well did they succeed ? 

C 

1. Explain in each case why the following are, or are not, 
enterprisers : 

a. Farmers. e. Professional beggars. 

b. Bankers. /. Railroad engineers. 

c. Scissors-grinders. g. Factory managers. 

d. Gamblers. h. Taxi-drivers. 

2. Give reasons why American enterprisers should be more 
daring than their European competitors. 

3. Explain just how the profits of a cotton-cloth manufac- 
turer may be affected by the following : 

a. New inventions and discoveries in spinning, weaving, 

dyeing. 

b. Increase or decrease in the ravages of the boll weevil. 

c. Changes in style of clothing. 

d. Production of wool, flax, and silk. 

e. Changes in the current rate of wages for farm labor, 

railroad men, weavers. 
/. Changes in the current interest rate. 

4. Recently a convention composed of wheat-growers de- 
clared that the low price of wheat then prevailing was caused 
by speculation on the Chicago Board of Trade. On the same 
day a body of millers assembled in a near-by city made the 



76 EXERCISES AND PROBLEMS 

claim that speculation in wheat caused wheat prices to be too 
high. Discuss. 

5. Sometimes a miller is found who refuses to have any 
dealings with a wheat exchange on the ground that to do so 
would be speculation. 

a. Can a miller trade in wheat without speculating? 

How? 

b. Can a miller who sells flour for future delivery avoid 

speculation if he refuses to buy wheat for delivery 
at the same time? Explain. 

c. Are millers more than other people likely to become 

wheat speculators? 

XXVII. SOCIALISM 



1. Why may socialism be considered a distributive problem ? 

2. May it be also a productive problem? Explain. 

3. Why should every one carefully examine the claims of 
socialism ? 

4. Account for the hazy notions many people have con- 
cerning socialism. 

5. Do socialists look forward to an equal distribution of 
wealth? of income? 

6. What essential beliefs divide socialists into groups? 

7. Just what did Marx mean by the expression, " surplus 
value "? 

8. Do socialists urge friendly relations between employer 
and employee? Why, or why not? 

9. What human motives hinder socialism? 

10. What is meant by the expression, " the institution of 
private property " ? 



SOCIALISM 77 

11. What administrative problems would confront a social- 
istic state? 

12. What important present-day questions of production 
would persist under socialism? 

13. Why, or why not, may we justly demand that the solu- 
tion of every administrative problem be pointed out before we 
give a respectful hearing to the principles of socialism? 

14. What is a substitute for socialism? 

B 

1. Consult with some well-known socialist in your com- 
munity. 

a. Ask him about the socialistic attitude toward present- 

day production, consumption. 

b. Get his opinion on the trend of public thought regard- 

ing socialism since 1910. 

c. Inquire concerning the administrative difficulties 

socialism is likely to meet. 

d. Get his views on the relation of socialism to organized 

labor. 

e. Learn the general attitude which socialism takes 

toward religion, education, marriage, charity. 

2. Inquire at random among older acquaintances concerning 
their notions of socialism. 

a. How many of the whole number appear to have given 

socialism any serious thought? 

b. How many appear to have fixed convictions on the 

subject? 

c. From your experience in this connection, what would 

you say regarding the general attitude of the Ameri- 
can public toward socialism? 



78 . EXERCISES AND PROBLEMS 

3. Confer with the best-informed anti-socialist in the com- 
munity and get his reaction on the claims made by your social- 
istic friends. Then you will be in a fairly good position to think 
for yourself. 

4. Analyze the answers of the business men to whom you 
put the following • questions : 

a. What is the origin of private property? 

b. Why should an individual be permitted to own and 

control private property? 

c. Would you favor the socialization of all private prop- 

erty? 

d. How would such a change affect society? industry? 

5. List any arguments you may think important in support 
of the government ownership of railroads. List also opposing 
arguments. 

C 

1 . How would you expect a change to socialism to affect the 
following : 

a. Farming? 

6. Plumbing? 

c. Retailing? 

d. Manufacturing? 

e. Teaching? 
/. Preaching ? 

g. Professional begging? 

h. Lending money? 

i. Renting residence houses? 

j. Coal mining? 

k. Professional singing? 

2. Imagine a system of socialism in operation in this 
country. 



SOCIAL INSURANCE 79 

a. What problems concerning production might arise? 

b. How would society be able to secure the services of 

skilled enterprisers? 

c. From what source would capital come ? 

d. What would determine the wages of plumbers, car- 

penters, unskilled workers? 

3. To what extent, if at all, are the following socialistic : 

a. Maintenance of free public schools? 

b. Regulation of street-car fares? 

c. City ownership of a gas plant ? 

d. Fixing the price of wheat ? 

4. Explain just why socialism should oppose labor strikes, 
cooperation, profit-sharing, social insurance. 

XXVIII. SOCIAL INSURANCE 

A 

1. Why are manual laborers, more than others, exposed to 
sickness, accidents, and death? 

2. Just how expensive, both from the individual and the 
social viewpoint, is each of these forms of disability? 

3. How does it happen that such a large proportion of old 
people are more or less dependent? 

4. Why does not the normal individual guard himself more 
carefully against accident and sickness? 

5. Can the typical American workman afford to carry any 
great amount of life or accident insurance? Why, or why not? 

6. Why should society undertake the protection of indi- 
viduals ? 

7. Why is charity inadequate? 

8. Just how does society guarantee a minimum to every 
individual member? 



80 EXERCISES AND PROBLEMS 

9. Why should society as a whole replace machines and not 
men? 

10. What influence did the autocratic government of Ger- 
many have on the development of social insurance among the 
Germans ? 

11. In what particular respects does the English plan of social 
insurance differ from the German plan? 

12. What are the outstanding features of accident in- 
surance ? 

13. Why has social insurance developed slowly in the United 
States ? 

14. Just to what extent have we gone? 

B 

1. Call to mind any financial distress which you have ob- 
served caused by accident or illness. 

a. To what extent was the laborer responsible for his own 

accident or illness? 

b. Did he carry accident or sickness insurance? What 

kind? 

c. Was he a member of a fraternal order? Which? 

d. Did his employer aid him? How? 

e. Did his trade union assist him financially? 

/. How far, if at all, was he aided by organized charity? 

2. Investigate any organized effort that is being made in 
your community to help the poor and unfortunate. 

o. What are the sources of financial support ? 

i. To what extent, if at all, are these funds raised 

by taxation? 
ii. Enumerate other methods of raising funds (tag 
days, etc.). 



SOCIAL INSURANCE 81 

b. What is the attitude of the people who are helped ? 

c. How is pauperization prevented ? 

3. Name the various agencies in your community which 
extend financial assistance to the distressed. 

a. Which are religious in nature? 

b. Which emphasize personal visitation? 

c. Which have membership dues? 

d. Which are purely philanthropic? 

4. Inquire as to the general attitude of your older ac- 
quaintances toward the county or other public almshouse. 

a. Does any stigma attach to its occupants? Why, or 

why not? 

b. Does anyone take the view that it is merely a method of 

guaranteeing a minimum subsistence to each member 
of society ? Who ? 

c. What is the viewpoint of the occupants themselves? 

5. Look about for other means of extending financial assist- 
ance to the incapacitated : 

a. Public hospitals. 

b. Government pensions. 

c. State and federal houses for disabled soldiers and sailors. 

d. State institutions for the unfortunate. 

e. Old people's homes maintained by fraternal organi- 

zation. 

May we consider these as forms of social insurance? Why, 
or why not? 

C 

1. The assertion is often made that each individual usually 
has it in his own power to provide against the dependency of 
old age by saving systematically during his productive years. 



82 EXERCISES AND PROBLEMS 

a. Might the typical American workman be more frugal? 

How? 
6. What other factor is necessary in saving? 
c. Calculate the annual saving necessary for 40 years to 

insure an income of $300 a year at the age of 60 on 

a six per cent basis. 

2. One of the best-known American cartoonists showed 
recently the attitude taken by men engaged in hazardous 
occupations. A structural steel worker standing on a narrow 
beam twenty floors above the street and an aeroplane pilot in 
his machine a thousand feet above, each observing the other, 
remarked how foolish some men were in taking risks. Why did 
each minimize his own risk and magnify the risk of the other? 

3. Suppose that society should devise some plan whereby 
house painters would be insured by the public against accident, 
sickness, old age dependence, and unemployment. 

a. Would the number of house painters tend to increase 

or decrease ? Why ? 

b. How would the wages of house painters be affected ? 

c. What would be the probable effect on the cost of 

painting a house ? 

d. In what way, if at all, would taxes be affected? 

e. Would a plumber's income be changed as a result? 

How? 

4. Would you class the following as forms of social insurance : 

a. Government pensions? 

b. Free treatment in railroad hospitals? 

c. State aid for the blind ? 

d. Insane hospitals? 

e. Retiring allowances to aged preachers? 
/. Teachers' pensions? 

g. Payments from a firemen's pension fund? 



SHARE OF THE GOVERNMENT IN DISTRIBUTION 83 

XXIX. THE SHARE OF THE GOVERNMENT IN DISTRI- 
BUTION (TAXATION) 



1 . Why are there often so many taxing bodies in a community ? 

2. What only restricts the power of Congress to lay taxes? 

3. Is this restriction important? Why, or why not? 

4. In what ways are taxing powers of local units limited? 

5. Why should the right of a school district to tax itself be 
regulated by state law? 

6. Are these regulations desirable? Explain. 

7. Account for the increase in the revenues of the national 
government during the past half century. 

8. What is the chief money-spending function of the national 
government ? 

9. What are the principal revenue sources of the school 
district? the county? the city? 

10. What is the justification for government expenditures 
where private funds would otherwise be used ? 

11. What risks are involved in government expenditures? 

12. Why, or why not, should taxes be levied according to 
benefit? 

13. What is the relation between the need of public assist- 
ance and the ability to pay taxes? 

14. Why should a school tax levied according to the benefit 
principle be impracticable? 

15. How does the ability principle of taxation tend to equal- 
ize incomes? 

16. What is the essential difference between a proportionate 
tax and a progressive tax? 

17. What are the merits of each? 

18. Just what is meant by "expediency" in taxation? 



84 EXERCISES AND PROBLEMS 

19. Why is an old tax usually preferred to a new tax? 

20. When is a tax said to be " shifted " ? 

21. Why are taxes usually easy to shift? Explain. 

22. Which taxes are the easiest to shift ? Why? 

23. What is a " general property tax " ? 

24. What are its chief defects ? 

25. Why do many people, otherwise honest, falsify their 
personal property tax-schedules? 

26. Why should income taxes and inheritance taxes be con- 
fined to the well-to-do classes? 

27. What is the essential difference between an income tax 
and an inheritance tax? 

28. Just why was a constitutional amendment necessary to 
legalize a federal income tax? 

B 

1. Get from the local tax-collector or from the proper county 
official, information concerning rates of taxation, purposes for 
which various taxes are imposed, the cost of collection, and the 
attitude which people take toward each kind of tax. 

2. Interview some friendly taxpayer. 

a. How does he regard the school tax? 

b. Has he suggestions to offer concerning changes in 

taxation ? 

c. Does he consider the valuation placed on his own 

property for taxing purposes equitable compared to 
the valuation placed on his neighbors' properties? 

d. Get his opinion on the weakness and strength of the 

general property tax. 

3. Make a list of enterprises supported out of public funds, 
which enterprises provide services free to all, regardless of their 
tax-paying abilities. 



SHARE OF THE GOVERNMENT IN DISTRIBUTION 85 

4. Secure, if possible, published lists of personal property 
assessments. 

a. Do there appear to be any discrepancies between the 

valuation placed on the personal property of any 
individual and the amount of personal property he 
is reputed to possess? 

b. How does the total valuation of personal property 

compare with the total valuation of real estate for 
the same area? 

c. Is there in your community a limit below which per- 

sonal property is not assessed? If so, why? 

5. Inquire of some tax-assessing official about the difficul- 
ties of determining property values, the inclination of people to 
undervalue their own property, the general dissatisfaction with 
valuations, and the criticism made of them. 

6. Suppose you were a member of a law-making body which 
had before it a bill for taxing boarding-house keepers ten dollars 
a year each, on the ground that the money thus raised in each 
city would pay the salary of a boarding-house inspector for that 
city. 

a. What is your first reaction on the question? 

b. Do boarding houses need to be inspected? Why? 

c. If so, who should pay the expense of inspection ? Why ? 

d. How would the fact that you represented a college town 

or a mining district affect your vote? 

e. How would you expect members from rural districts to 

vote? 



1 . The property of the residents of a certain section of one of 
the largest cities in the United States is taxed by twenty-seven 
taxing boards. 



86 EXERCISES AND PROBLEMS 

a. Why have so many taxing boards been developed ? 

b. Is it probable that one taxing body could accomplish 

the same purpose? Explain. 

c. Would you expect the aggregate rate to be higher in 

one case than in the other? Why, or why not? 

2. In the matter of official patronage, measured either in 
numbers or in salaries, the Mayor of New York City ranks 
alongside the President of the United States. 

a. Account for this fact. 

b. Compare the receipts and expenditures of the two 

organizations. 

c. Contrast the governmental functions of the two 

organizations. 

3. The argument is often advanced that each should be 
taxed according to the benefit he gets from the expenditure of 
public money. 

a. What effect do good schools have on the number and 

character of the people in the community? 

b. How does an increase in population together with a 

rise in its standards affect property values? legiti- 
mate business? 

c. What return, then, does a childless property owner or 

a childless business man get from his school taxes ? 

4. The administration of a tax levied according to the benefit 
principle would be extremely difficult. 

a. When should each property holder pay his taxes for 

the support of a city fire department? 

b. What should each pay toward maintaining a public 

park? a health bureau? 

c. Why should not non-resident owners of vacant lots be 

entirely exempt from such taxes? 



SHARE OF THE GOVERNMENT IN DISTRIBUTION 87 

5. The statement that a land tax cannot be shifted needs to 
be examined with care. Would the shifting be possible if the 
tax collected were spent on building improved wagon roads? 
Can you think of other expenditures that might add to the 
productiveness of the land taxed, and hence increase its eco- 
nomic rent? 



Elementary Economics 

By CHARLES MANFRED THOMPSON 

Associate Professor of Economics, University of Illinois 

The period of reconstruction following the Great War 
calls for the solution of difficult economic problems. 
Men of all walks of life, particularly school men, are 
turning their attention to these problems ; and the tend- 
ency is a healthful sign, for on the correct solutions 
of them the prosperity and well-being of the country 
depend. 

Interest in the subject of economic science is not con- 
fined to college men and women. At the present time 
more than fifty thousand high-school pupils are enrolled 
in classes in Economics. Conservative school men pre- 
dict that this number will be doubled within the next 
few years. 

Clearly one of the chief essentials in such a course is 
a textbook adapted to the needs of high-school pupils — 
a text characterized by simplicity and concreteness as 
well as by scholarship. 

Such a text is Thompson's " Elementary Economics." 
It is scholarly, well written, interesting in style, and 
within the grasp of high-school pupils. Teachers are 
invited to examine this new book, especially those prin- 
cipals and superintendents who have objected to the 
study of Economics in the high school on the ground 
that available textbooks were unsatisfactory. 



BENJ. H. SANBORN & CO. 

CHICAGO NEW YORK BOSTON 



History of the United States 

Political — Industrial — Social 

By CHARLES MANFRED THOMPSON 

Associate Professor of Economics, University of Illinois 

11 Professor Thompson's 'History of the United States ' is 
admirably adapted as a textbook for college classes in eco- 
nomic history. In arrangement, plan, and subject matter it 
is excellent. The style is such as to arouse and hold the 
student's interest. The volume presents clearly, simply, and 
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events and forces. It indicates clearly the bearing of eco- 
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American life in such a way as to give a well-balanced and 
rounded out view of the rise and development of the United 
States. I am confident that the work will prove a highly 
useful one." — Ralph E. Heilman, Professor of Economics and 
Social Science, Northwestern University. 

" Teachers should find Thompson's ' History of the United 
States ' usable. Its general point of view, pleasant, readable 
style, profusion of interesting illustrations, and general 
mechanics will recommend it to every one. Those teachers 
who do not see the intimate relation between the economic and 
the political, or who do not believe it desirable to teach these 
phases of growth at the same time, will not find it of great aid. 
Neither will the volume find its greatest favor with those 
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ment and one another, and are in turn reacted upon in a 
constantly evolving complex, will welcome this as a very 
serviceable book." — The Journal of Political Economy. 

Pages, 540; price, $1.64 



BENJ. H. SANBORN & CO. 

CHICAGO NEW YORK BOSTON 



LIBRARY OF CONGRESS 




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013 721 032 



